Frugal value designing business for a crowded planet

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Frugal value designing business for a crowded planet

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Frugal Value Designing Business for a Crowded Planet Millstone2016_TEXT5.indd 28/04/2017 10:49 ‘Millstone silences the happy talk about business sustainability and brings the sustainability concept down to earth, literally Brilliantly, she shows what sustainability truly requires for both individual businesses and for the economic system as a whole Persuasively argued and well written, Frugal Value is a path-breaking synthesis that deserves an audience far beyond the business community.’  James Gustave Speth, former Dean, Yale School of Forestry and Environmental Studies, and author of America the Possible: Manifesto for a New Economy ‘Ambitious, serious, and inspiring At last someone’s asking the right question What will it really take to get business on a sustainable path? Millstone’s unsparing critique of what passes today for “sustainable business” will provoke furious debate; her alternative lays out an agenda for business to become a real force for good Required reading.’ Paul Gilding, Former Executive Director of Greenpeace International ‘Corporate sustainability has made some progress over the last two decades, but nothing like enough Carina Millstone’s insightful book calls time on the “business case ­rationale” for companies trying to the right thing, and urges instead a more radical “moral case”, based on new design and operational principles.’ Jonathon Porritt, Founder Director, Forum for the Future ‘A well-informed and forthright challenge to conventional wisdom Love it or hate it, just read it! This is the spirited debate we need today.’ Ken Webster, Head of Innovation at the Ellen MacArthur Foundation ‘A book that is unique and much needed … The title will present a new concept, but it is an important one, which I hope will be accepted into common parlance.’ Professor Neva Goodwin, Co-Director of the Global Development and Environment Institute, Tufts University ‘Frugal Value reminds us that sustainability – despite its widespread abuse as a concept over the past 30 years – remains non-negotiable The Planet cannot be “traded off” for profit any more than oxygen can traded off for food Frugal Value is a wake-up call to business leaders and sustainability practitioners alike: neither the “business case for sus­ tainability” nor current “sustainable consumption and production” practices will get us anywhere near to the biodiverse and ecologically secure future we need to survive and thrive Millstone calls attention to the elephant in the room – the current failure of so-called sustainable practices – and with skilful analysis, sketches out a more ambitious, transformational path: the imperative of redesigning our economic system and business models to achieve frugal value.’ Professor Wayne Visser, Cambridge Institute for Sustainability Leadership, and author of Sustainable Frontiers ‘This tough-minded book isn’t afraid to cast aside the cherished shibboleths of sustainable business It asks the hard questions, and points the way forward with challenging answers.’ Professor Jem Bendell, Institute For Leadership And Sustainability (IFLAS), University of Cumbria ‘Far from frugal, this book’s recipe for achieving customer satisfaction is through massive reduction in resource use and wide social benefit rather than by sidestepping these issues I can’t recommend more that you read it.’ Sara Parkin, Founder Director of Forum for the Future and author of The Positive Deviant Millstone2016_TEXT5.indd 28/04/2017 10:49 FRUGAL VALUE Designing Business for a Crowded Planet CARINA MILLSTONE Millstone2016_TEXT5.indd 28/04/2017 10:49 First published 2017 by Routledge Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2017 Routledge The right of Carina Millstone to be identified as author of this work has been asserted by her in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988 All rights reserved No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book has been requested ISBN: 978-1-78353-388-6 (hbk) ISBN: 978-1-78353-338-1 (pbk) ISBN: 978-1-35124-415-2 (ebk) Cover by Sadie Gornall-Jones Millstone2016_TEXT5.indd 28/04/2017 10:49 To Isidore and Leopold Millstone2016_TEXT5.indd 28/04/2017 10:49 Contents Acknowledgements ix Introduction: the failure of sustainable business Part 1: The Crowded Planet The economy-in-Planet 11 The transition to the economy-in-Planet 25 Part 2: Products and services 37 The purpose and design of products 39 Properties of efficient and sufficient products 47 Part 3: Activities and business models 67 Product stewardship 69 Product access 83 Millstone2016_TEXT5.indd 28/04/2017 10:49 viii  Frugal Value Part 4: Operations and supply chains 105 The case for proximity and appropriate scale 107 The case for worker-centredness 117 Part 5: Ownership structure, financing and legal form 135 The problem with shareholdership in the legacy economy 137 10 Ownership by workers, beneficiaries and investors 147 Part 6: The purpose, scope and limits of business 163 11 Profit, financial and worthwhile 165 12 Lifestyle creation, through business or otherwise 175 Conclusion: what would it take to make frugal value possible? 187 Bibliography 197 Glossary 203 About the author 210 Millstone2016_TEXT5.indd 28/04/2017 10:49 Acknowledgements This book would not have been written without Irene Krarup, Neva Goodwin and the trustees of the V Kann Rasmussen Foundation, who all understood from the very beginning what I sought to get at with this project For their enthusiasm, confidence and generous support I am deeply grateful Many academics, activists and students have provided feedback on this work at different stages of its elaboration I would particularly like to thank André Reichel; John Blewitt; Sophie Dunkerley; Halina Brown and her students at Clark University; Ben Cattaneo; the teams at the New Economy Coalition and at the Institute for Policy Studies in Boston; the private sector team at Oxfam UK; the team at the International Institute for Environment and Development; the team and fellows of the Global Development and Environment Institute at Tufts University; Ian Roderick and the fellows of the Schumacher Institute; and the students of Forum for the Future For enlightening conversations I would like to thank Tim Cooper, Howard Brown, Donnie Maclurcan, Gus Speth, Gar Alperovitz, Leslie Harroun, Katherine Trebeck and Emily Benson; and, for research, design and support in other ways, Kasia Hart, Sandra Moore, Allison Meierding, Claire Maxey and Daniel Millstone Thank you to the team at Greenleaf Publishing, especially Rebecca Macklin and Victoria Halliday, for their guidance and patience And, finally, thank you to Noah Millstone, for unwavering support and encouragement, fierce criticism and endless hours of lone parenting Millstone2016_TEXT5.indd 28/04/2017 10:49 196  Frugal Value their constituents, are poorly suited to this kind of experimentation Businesses, with their capacity for innovation, are in a position to play just that role Pioneering companies could provide the on-the-ground exemplars of success that policymakers and regulators need to make the case, and put in place the measures for systemic change that will enable the transition to the economy-in-Planet Surely, even with all the challenges ahead, this is enough of a reason for pioneering companies to get going straight away Millstone2016_TEXT5.indd 196 28/04/2017 10:50 Bibliography Alcott, B (2005) Jevon’s Paradox, Ecological Economics, 54: 9-21 American Public Transportation Association (2015, March 3) Uber and Lyft users more likely to use public transit frequently, own fewer cars and spend less on transportation Retrieved from http://www.apta.com/mediacenter/pressreleases/2016/Pages/160315_Shared-UseMobility.aspx Ashford, N.A., & Hall, R.P (2011) Technology, Globalization and Sustainable Development: Transforming the Industrial State New Haven, CT/London: Yale University Press Atkins, P (2010) The Laws of Thermodynamics: A Very Short Introduction Oxford, UK: Oxford University Press Ayres, R.U (2007) On the practical limits to substitution Ecological Economics, 61: 115-128 Bakker, C., den Hollander, M., van Hinte, E., & Zijlstra, Y (2014) Products That Last: Product Design for Circular Business Models TU Delft Library Bamburg, J (2006) Getting to Scale: Growing your Business without Selling Out San Francisco: Berrett-Koehler Publishers Bansal, P., & DesJardine, M.R (2014) Business sustainability: It is about time Strategic Organization, 12(1): 70-78 Bauwens, M (2006) The political economy of peer production Post Autistic Economics Review, 37(3): 33-44 Benyus, J.M (2002) Biomimicry: Innovation Inspired by Nature New York: HarperCollins Bocken, N.M.P., & Short, S.W (2016) Towards a sufficiency-driven business model: Experiences and opportunities Environmental Innovation and Societal Transitions, 18: 41-61 Botsman, R., & Rogers, R (2010) What’s Mine Is Yours: The Rise of Collaborative Consumption New York: Harper Paperbacks BP (2012, June) Statistical Review of World Energy Retrieved from www.bp.com/ statisticalreview Brown, H.J., Cheek, K.A., & Lewis, K (2012) Naked Value: Six Things Every Business Leader Needs to Know about Resources, Innovation and Competition USA: dMASS Media Brown, M (2016) Sharing in the outdoors: Lessons learnt from a failed sharing economy start-up Medium.com Retrieved from https://medium.com/@MichaelBrown22000/ sharing-in-the-outdoors-558534adb50e#.49ys2icvh Chouinard, Y., & Stanley, V (2012) The Responsible Company: What We’ve Learned from Patagonia’s First 40 Years USA: Patagonia Books Millstone2016_TEXT5.indd 197 28/04/2017 10:50 198  Frugal Value Clark, D (2013, November 20) Which companies caused global warming? 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New York: John Wiley & Sons Wilson, A., & Boehland, J (2008) Small is beautiful: US house size, resource use, and the environment Journal of Industrial Ecology, 9(1–2): 277-287 Woolf, N (2016, June 27) Airbnb and house-sharing firms reduced New York housing stock by 10%: study The Guardian Retrieved from https://www.theguardian.com/us-news/2016/ jun/27/airbnb-new-york-city-housing-stock-reduction-study World Economic Forum (2011) The consumption dilemma, Leverage points for accelerating sustainable growth Retrieved from http://www3.weforum.org/docs/WEF_ConsumptionDilemma_SustainableGrowth_Report_2011.pdf Zellweger, T.M., & Astrachan, J.H (2008) On the emotional value of owning a firm Family Business Review, 21(4): 347-363 Millstone2016_TEXT5.indd 202 28/04/2017 10:50 Glossary Anthropocene: A term coined by P Crutzen; refers to a new geological era, in which human action guides environmental change The Anthropocene is a product of industrial production and consumption Appropriate scale: See Optimal scale Artefact: Anything human-made Used interchangeably with object, product, item Beneficiary-owner: A company owner who is also the direct beneficiary of the company’s product or service Beneficiary-owners can be customers or a particular geographic community Business model: The channel through which revenue is generated, which comes from specific business activities Concentrated operations: Business operations that are designed to reap economies of scale, and are therefore usually large, the location of which is often unimportant for customer-facing business activities but may have some logistical or commercial advantages for supply chains Crowded Planet: A term used to describe the Planet, in light of unprecedented population numbers and the resource use that comes from current lifestyles (in the Global North) Debound: The capacity to amplify resource use reduction Decoupling: The process of reducing the environmental resources needed for each unit of economic activity, increasing the efficiency with which natural resources are used to generate economic value Degrowth: The planned, deliberate process by which we can transition from an economy in ecological overshoot to one that operates within its host planetary environment One example academic definition is the “equitable downscaling of production and consumption that increases human wellbeing and enhances ecological conditions at the local and global level” (Schneider et al., 2010) Millstone2016_TEXT5.indd 203 28/04/2017 10:50 204  Frugal Value Diseconomies of scale: The scale at which further increases in size present disadvantages rather than advantages More specifically, the scale at which the environmental benefits of scale that usually come through better resource efficiency are lost, and scale instead presents a threat to resource use reduction Dispersed operations: Business operations positioned to facilitate business activities that support resource use reduction, often close to customers These operations are appropriately scaled, usually smaller than concentrated operations Durability: One of the properties of long-lived objects, achieved through technical design interventions Ecological impact: See Planetary impact Economies of scale: The phenomenon by which increases in production volume are associated with a decline in the unit cost of production, because the fixed costs of production are spread more widely across units In addition to cost benefits, economies of scale are also likely to yield resource efficiencies Economy of distance: A widespread, but not universal, feature of the legacy economy Distance takes multiple forms: it is the distance between sites of production and sites of consumption, the distance between companies and their suppliers, customers or markets, and owners Economy of proximity: A widespread, but not universal, feature of the economyin-Planet Proximity takes multiple forms: it is the proximity between sites of production and sites of consumption, the proximity between companies and their suppliers, customers or markets and owners Economy-in-Planet: A term used to describe the sustainable global economy, with two key features: first, a sustainable rate of inflow of resources into the economic system from the planetary system, determined through scientific and ethical consensus; second, slow, circular flows of resources within the economic system Efficiency: Used as shorthand for resource efficiency: that is to say, the process of using minimal resources per unit of production Tends to increase resource use overall Efficient product: A product that requires minimal resource use for its creation and operation, achieved through three key features: efficient products are resourcesparing, nature-inspired and user-centred External shareholders: Company equity holders that are neither workers nor beneficiaries, whose interest in firm ownership is exclusively financial; usually thought of as the archetypal business owners of the legacy economy, even if ownership in the legacy economy takes multiple forms Externality-created profit: A type of profit usually generated by companies in the legacy economy, by minimising costs through negative externality generation Externality: A company’s environmental and social impacts that affect parties other than the business itself or its customers While externalities can sometimes be “positive”, they are usually “negative” Millstone2016_TEXT5.indd 204 28/04/2017 10:50 Glossary 205 Fast linear economy: The central characteristic of resource flows in the legacy economy, from the planetary system, through use in the economy, before expulsion back into the planetary system as waste and pollution Financial profit: The type of profit generated for owners whose motivation for firm ownership is exclusively financial; the type of profit usually considered paradigmatic in the legacy economy Tends toward maximisation, driving negative externality generation and growth Frugal innovation: Innovation in all facets of a company—products, activities, business models, ownership structure, legal form, financing—that contributes to absolute resource use, resource use stabilisation and the building of resilience Frugal product: A product that is both efficient and sufficient Frugal value: The type of value created by pioneering companies through frugal innovation Growth-created profit: A type of profit usually generated by companies in the legacy economy, through company growth Investor-owner: A company owner whose interest in the company is primarily financial In the legacy economy, these owners are known as external shareholders and present significant problems for sustainability; in the economy-in-Planet, there may be benefits to this type of ownership under specific circumstances only Legacy economy: A term used to describe the current, unsustainable economy, the unsustainability of which is rooted in resource inflows from the planetary to the economic system determined through market mechanisms; and fast, linear resource flows of resources within the economy, before expulsion back into the planetary system as waste and pollution The legacy economy is a product of the industrial era, relies on industrial machines and fossil fuel energy; consumption and production are unsustainable Legacy product: An object in the legacy economy, which often relies on industrial machines and fossil fuels for its creation and operations Lifecycle approach: An approach to product design, in which the environmental and social impacts of products from manufacture, through use and disposal, are taken into account at design stage Longevity: One of the key features, along with shareability, of sufficient products; longevity contributes to absolute resource use reduction by reducing the need for artefacts over time Machine intensity: The share of machines in the transformation process (as opposed to the share of workers) The greater the machine intensity of a transformation process, the smaller its worker intensity During the industrial era, transformation processes are usually of high machine intensity Machine: Refers to all the equipment, ranging from laptops, to vehicles, factories and tools, which help workers produce customer-ready goods and services; also known as technology Millstone2016_TEXT5.indd 205 28/04/2017 10:50 206  Frugal Value Nature-inspired: A property of efficient products A product is nature-inspired when its impacts on planetary sinks and regulation are minimal 0ptimal scale: The scale at which the resources used in a company for its value creation, both in its operations and business activities, is minimised Path independency: The opposite of path dependency: that is to say a lock-in to certain technologies chosen in the past, despite the more recent availability of better, more environmentally efficient alternatives; an important feature to design into long-lived products to counter the risk of path dependency posed by durability Peer-to-peer economy: The type of economy supported by platform companies, which purport to support direct consumer-to-consumer exchange (rather than producer-to-consumer exchange) Pioneering company: A company that responds to the challenges posed by the Crowded Planet through frugal value creation Planetary boundaries: The planetary boundaries, conceptualised by J Rockström, identify the upper permissible limits of environmental degradation brought about by human activity to retain the ecological conditions necessary to support human life Three of the nine planetary boundaries (the phosphorus cycle, stratospheric ozone depletion, ocean acidification, global freshwater use, change in land use, atmospheric aerosol loading and chemical pollution, biodiversity loss, climate change and nitrogen loading) have already been breached Planetary impact: The impact of resource use on environmental conditions, including on sinks and regulation Platform companies: Companies that provide a digital platform for peer-to-peer exchange, supporting prosumption Product-access company: A company the activities of which contribute to resource use reduction through boosting product shareability, making products available to multiple customers through rental, leasing, service provision or through peer-to-peer exchange Product-access companies play an important role in the economy-in-Planet Pioneering companies are often product-access companies Product lifecycle: The “life” or journey of a product from inception into final disposal, including design, materials sourcing, manufacture, distribution, use, materials recovery and eventual disposal Product Service System: An academic approach that conceptualises product as providers of particular services, which could support business activities and models whereby these services are sold in lieu of the product itself The classic example may be the sale of carpet services—providing insulation, warmth, comfort, a particular feel—rather than the carpet itself Product steward: A company engaged in product stewardship activities; pioneering companies are often product stewards Millstone2016_TEXT5.indd 206 28/04/2017 10:50 Glossary 207 Product stewardship: Refers to all activities that contribute to resource use reduction by boosting product longevity, including maintenance, retrieval, remanufacture and redistribution; could also include the management of secondary markets for user-owned objects, or leasing models for user-accessed ones Pioneering companies are often engaged in product stewardship and are known as product stewards Prosumption: A term coined by A Toffler, which refers to the act through which people traditionally thought of as “consumers” also engage in the act of production Re-activities: The types of activities taken on by product stewards to extend product lifetimes, including refurbishment, remanufacture Regulation (planetary): The capacity of the Planet to maintain certain conditions, through its capacity to absorb waste, the great natural cycles The central problem of climate change is one of deregulation Resource efficiency: See Efficiency Resource sufficiency: See Sufficiency Resource-intense lifestyles: The lifestyles that prevail in the legacy economy (in the Global North), which come from a process of unsustainable production and consumption, often created by profit-maximising firms Resource-light lifestyles: The lifestyles that prevail in the economy-in-Planet, which come from a process of sustainable production and consumption, to which profit-seeking firms contribute Pioneering companies contribute to the creation of these types of lifestyles Resource-sparing: A property of efficient products A product is resource-sparing when it uses the least amount of resources possible in order to perform its job Resources (planetary): Earth’s stocks, “things”, which provide the material basis for our economy F Krausmann identifies four categories of resources: biomass, construction materials, fossil fuels, ores and industrial minerals Shareability: One of the key features, along with longevity, of sufficient products; contributes to absolute resource use reduction by reducing the need for artefacts now Sinks (planetary): Earth’s capacity to effectively absorb the waste that comes from human economic activity; exceeding the Earth’s sink capacity results in irremediable pollution and planetary deregulation Slow circular economy: The central characteristic of resource flows in the economyin-Planet, once resources have entered the economic system Substitution: The suggestion that scarce, impactful resources could be replaced by bountiful, less impactful alternatives to support continued economic growth; only possible to a certain extent Sufficiency: Used as shorthand for resource sufficiency: that is to say, the process of contributing to resource use reduction overall, or absolute resource use reduction Millstone2016_TEXT5.indd 207 28/04/2017 10:50 208  Frugal Value Sufficient product: A product that contributes to overall or absolute resource use reduction through two key features: longevity and shareability Sustainability: The state or ongoing conditions in which sustainable development has been achieved Sustainable consumption and production: Using the UN’s definition, sustainable consumption and production (SCP) is “the use of services and related products, which respond to basic needs and bring a better quality of life while minimizing the use of natural resources and toxic materials as well as the emissions of waste and pollutants over the life cycle of the service or product so as not to jeopardize the needs of future generations” (UNEP, 2010) Sustainable development: Using the 1987 Brundltand Report definition, sustainable development is development that “seeks to meet the needs and aspirations of the present without compromising the ability to meet those of the future” (WCED, 1987) Sustainable economy: An economy congruent with sustainability, which provides us with the goods and services that we need for lives of decent material comfort, without undermining the ability of future generations to meet their own material needs Transformers: In operations, refers to machines and workers, who together transform production inputs into customer-ready goods and services During the industrial era, the transforming capacity of machines and workers was revolutionised through fossil fuel energy Unsustainability: The state or ongoing conditions in which sustainable development has not been achieved User-accessed product: An item for which access alone allows the product to perform its function An increase in the number and types of user-accessed items at the expense of user-owned items would reduce the number of objects in the world, without losing the benefits that come from products User-centredness: A property of efficient products A product is user-centred when it optimises the human activity required in its job performance User-owned product: An item for which object ownership is integral for the object to perform its function Whether a product is user-accessed or user-owned is in part culturally determined Worker intensity: The share of workers in the transformation process (as opposed to the share of machines) The greater the worker intensity of a transformation process, the smaller its machine intensity The operations of the pioneering company often have high worker intensity Worker-owner: A company owner who also works for the company Worker-owners can be entrepreneurs, managers, small business owners or employees Millstone2016_TEXT5.indd 208 28/04/2017 10:50 Glossary 209 Worker-centredness: A feature of business operations that take into account the nature of work required in transformation, in order to create “good” jobs The exact quality taken on by worker-centredness depends on the types of machines required in the transformation process At its most basic, worker-centredness is about creating occupations that are safe, pay a secure wage, enough to meet living expenses, while respecting labour rights; at its best, it is about creating occupations also offer fulfilment by allowing the application and development of skills and autonomous working The pioneering company prioritises workercentredness and makes it core to its value proposition Worthwhile profit: The type of profit generated for owners whose motivation for firm ownership is not exclusively financial, but rather includes other goals such as lifestyle, enjoyment of running a business or service to a community This type of profit is widespread in the legacy economy, but not usually recognised, and is the type of profit generated in the economy-in-Planet It does not necessarily tend toward maximisation Millstone2016_TEXT5.indd 209 28/04/2017 10:50 About the author Carina Millstone is a sustainability professional and campaigner She has held a variety of advisory, programmatic and advocacy roles in the UK and the US, working with public, private and non-profit organisations on behalf of Environmental Resources Management, the New Economy Coalition, and Changing Markets She has been a Visiting Research Fellow at the Global Development and Environment Institute at Tufts University and is a Research Fellow of the Schumacher Institute She founded The Orchard Project and currently serves as the Executive Director of Feedback Global Millstone2016_TEXT5.indd 210 28/04/2017 10:50 ... past 30 years – remains non-negotiable The Planet cannot be “traded off” for profit any more than oxygen can traded off for food Frugal Value is a wake-up call to business leaders and sustainability... hope for an increase in the quantity of available materials and resources; the Planet, at its permanent, stable size, is all we’ve got These planetary characteristics are not quirky facts, but rather... frameworks and “cost–benefit” analyses, all supposedly seeking to “balance” environment, society and financial returns Sustainability is approached as a negotiation, a balancing act, and trade-off

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  • Cover

  • Half Title

  • Title

  • Copyright

  • Dedication

  • Contents

  • Acknowledgements

  • Introduction: the failure of sustainable business

  • Part 1: The Crowded Planet

    • 1 The economy-in-Planet

    • 2 The transition to the economy-in-Planet

    • Part 2: Products and services

      • 3 The purpose and design of products

      • 4 Properties of efficient and sufficient products

      • Part 3: Activities and business models

        • 5 Product stewardship

        • 6 Product access

        • Part 4: Operations and supply chains

          • 7 The case for proximity and appropriate scale

          • 8 The case for worker-centredness

          • Part 5: Ownership structure, financing and legal form

            • 9 The problem with shareholdership in the legacy economy

            • 10 Ownership by workers, beneficiaries and investors

            • Part 6: The purpose, scope and limits of business

              • 11 Profit, financial and worthwhile

              • 12 Lifestyle creation, through business or otherwise

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