High-Level System Change: Protecting Business and Society
August 1, 2017
Human systems have evolved for millennia, and will continue to do so. Changing current economic and political systems (high-level system change) can seem difficult or impossible, as it did to people in the past before their systems collapsed. Modern economic and political systems were developed from a reductionistic perspective that ignores much of reality. These well-meaning, but unintentionally destructive systems force all companies to degrade the environment and society. If businesses attempt to voluntarily mitigate all negative impacts, they will put themselves out of business long before reaching full impact mitigation. As companies are forced to harm society, negative impacts increasingly return to harm them, often in the form of reputation damage, lawsuits, market rejection, and ultimately reduced profitability and shareholder returns.
In the political area, political parties divide citizens and prevent them from working together on their massive areas of common interest, such as protecting life support systems and society. Our flawed, unintentionally destructive economic and political systems inevitably will evolve. The only options are voluntary or involuntary change. Nature and reality force all flawed human systems to change, as occurred with the American and French revolutions, end of slavery in the US, and fall of communism in the Soviet Union.
Flawed systems usually change involuntarily through collapse. Collapse of current systems would bring unprecedented suffering and disruption. Voluntary high-level system change is by far our best option. It also is the most complex challenge facing business and society. Humanity is tremendously creative and talented. If we devote enough time, attention and resources, we can evolve our systems into sustainable forms. This paper summarizes how to achieve this goal and the benefits of doing so.
The implied economics of nature are nearly infinitely more sophisticated than human economic and other systems. Nature enables nearly all plants and animals to reach their fullest potential without inhibiting the ability of future generations to survive and prosper. Nature produces no waste, lives on renewable resources, equitably distributes resources, decentralizes production and equally values current and future generations. As parts of nature, we have the innate ability to match its immense coordination, symmetry, sophistication and true long-term prosperity.
Effectively emulating nature requires expanding our perspective from the individual to the whole system. Nature implicitly operates from a whole system perspective. All aspects are balanced and taken into account. The wise Founders of the US thought from a whole system perspective. Promoting the general welfare is the most important purpose of government stated in the Constitution. It encapsulates all other stated purposes. The Founders understood that the well-being of the whole system should take priority over individual well-being, because individuals ultimately cannot prosper if the larger systems that support them are not stable and preferably thriving.
Uniting and empowering citizens is another essential requirement for high-level system change. Citizens collectively are the most powerful force in society. In his Farewell Address, George Washington warned that vested interests would use political parties to divide and disempower citizens. Taking away the people’s ability to rule themselves and work together might appear to benefit vested interests. But degrading the environment and society ultimately harms them. United, well-informed citizens will focus the economy, government and society on maximizing the long-term well-being of society. In summary, emulating nature, thinking from a whole system perspective and uniting citizens are essential components of evolving economic, political and other human systems into sustainable forms.
High-level system change is so complex and far-reaching that it only can be achieved successfully through collaboration. The book Global System Change: A Whole System Approach to Achieving Sustainability and Real Prosperity discusses four levels of system change. The lowest level is unilateral system change. This mainly involves internal organizational changes. Mid-level system change involves collaborative systemic change at the sector, stakeholder or environmental/social issue levels. High-level system change focuses on evolving overarching economic, political and social systems into sustainable forms. Global system change refers to evolving the highest level whole system that humans influence – the whole Earth system and its sub-element human society.
High-level system change includes national and state-level, specific and broad economic, political and social system changes. High-level system change is essential because, as noted, flawed economic and political systems compel all companies to degrade the environment and society. Very generally speaking, companies can voluntarily mitigate about 20 percent of their tangible and intangible, short-term and long-term, negative environmental and social impacts in a profit-neutral or profit-enhancing manner. Beyond this point, costs usually go up. If companies continue down this path of voluntary corporate responsibility, they will put themselves out of business.
No one intended that our economic and political systems would degrade and possibly destroy life support systems and society. Unintentional degradation results from myopia – failure to think and act from a whole system perspective. If we do not figure out how to evolve our systems into sustainable forms voluntarily, they will cause rapidly growing problems for business and society, and then collapse, causing even greater disruption and suffering.
Collaboration is essential because no segment of society is powerful enough to change overarching systems. There are several high-level system change efforts around the world, often focused on economic reform. These collaborations frequently are reductionistic, and therefore have limited success. They sometimes focus on addressing only one or a few system flaws, such as externalities or measurement of social well-being. In addition, the efforts often do not address all relevant issues and aspects of society, including political, media and public deception.
High-level system change only can succeed if it is done from a whole system perspective. Collaborative groups initially should focus on high-level goals and all relevant aspects of the whole system. This enables groups to see root causes, systemic barriers, key leverage points and most effective solutions. A whole system perspective also enables groups to identify linkages and synergies. This can facilitate development of efficient and effective solutions that address or resolve multiple issues at once.
To illustrate, a high-level system change collaborative might initially focus on maximizing the well-being of current and future generations by applying the rule of law to businesses. Failing to hold companies fully responsible for negative impacts is a primary overarching economic and political systems law. It places businesses in conflict with society. This is the specific mechanism that compels companies to degrade the environment and society, and thereby create growing problems for business. Flawed systems make it impossible for companies to mitigate about 80 percent of negative environmental and social impacts and remain in business. Protecting business and society requires that systems be evolved in ways that hold companies fully responsible. This eliminates conflicts between business and society. It makes acting in a fully responsible manner the profit-maximizing strategy.
The rule of law is a fundamental component of libertarian and other philosophies. Civilized society cannot exist without it. The rule of law says that individuals and businesses should be free to do what they want, provided that they do not cause harm. The rule of law usually is effectively applied to individuals. They are held responsible through murder, assault and many other laws. However, the rule of law is poorly applied to businesses in many countries, especially the US. Companies are not held responsible for causing extensive environmental and social degradation (i.e. harm).
There are many specific economic and political system flaws that directly or indirectly fail to hold companies fully responsible for negative impacts (i.e. fail to apply the rule of law). Examples relate to externalities, limited liability, time value of money, overemphasizing economic growth and shareholder returns, failure to adequately measure social well-being, inappropriate government influence (through campaign finance, lobbying and job rotation between business and government), lack of democracy, lack of congressional and judicial term limits, media deception, public division and disempowerment, private sector money creation (i.e. fractional reserve lending), and myopic application of the concepts of economies of scale, free trade and competitive advantage (i.e. failure to use a whole system approach that accounts for all negative and positive impacts).
All of these system flaws are connected. It would be reductionistic and ineffective to attempt to address them individually. This approach could be thought of as making incremental adjustments to existing systems. History shows that this probably will not work. The solution to feudalism, slavery and other unfair, unsustainable systems was not to incrementally improve them. It was to replace them with sustainable, fair systems.
Effective high-level system change should be informed and guided by the end state or desired outcome. Beneficial, non-disruptive evolution from current to sustainable systems will involve incremental adjustments to current systems, such as addressing the specific system flaws noted above. However, incremental improvements should occur in the context of a practical, whole system strategy, rather than be the focus or goal of high-level system change efforts.
As noted, effective high-level system change collaboration should initially focus on higher level goals. A main purpose of the collaboration should be to develop plans and processes for achieving these goals. For example, system change experts within the collaboration might suggest a sequence of incremental, often simultaneous changes that achieve the high-level goal of applying the rule of law to businesses.
Emphasizing specific system flaws could inhibit collaboration formation. System changes that potentially reduce profitability, such as addressing externalities and limited liability, could prevent businesses and their allies from joining. It would be more effective to emphasize how flawed economic and political systems cause large and growing problems for business and society. These systems inevitably will collapse if we do not change them first. Widespread and rapidly growing environmental and social degradation strongly indicate that modern systems probably will change soon. This awareness can create a sense of urgency. It can help businesses and other important collaboration participants to realize that they are much better off taking a seat at the system change table and managing the process in a non-disruptive manner, rather than suffering the consequences of inaction.
Maximizing economic growth and shareholder returns is the systemically-mandated focus of business and society. This myopic focus is unintentionally destructive. Through high-level system change collaboration, we can evolve the context to a reality-based, sustainable vision. Under sustainable systems, the primary focus of business, government and society would be on maximizing the long-term well-being of society. No business executive or investor intends to harm life support systems, employees, customers or any other aspect of society. Flawed systems compel them to do so. Sustainable systems remove these conflicts.
Nature implicitly focuses on maximizing the well-being of the whole system. This approach will be imposed on humanity one way or another. We either will voluntarily comply with the laws of nature and reality, or nature will force compliance in an extremely disruptive, possibly society-ending manner. Clearly we are better off aggressively pursuing the former before nature imposes the latter.
Another critical aspect of high-level system change collaboration is seeking common ground and working across the political spectrum. Differences between Republicans and Democrats, for example, largely are illusions perpetuated by vested interests. We agree on many of the most important issues in society. Nearly everyone would agree that we should protect life support systems (because failing to do so is suicidal), ensure true democracy (i.e. abide by our Constitution), use the public wealth to equally and fairly benefit all citizens, protect future generations, and apply the rule of law to businesses at least as well as we apply it to individuals. As noted, George Washington warned that vested interests would use political parties to divide and disempower citizens. We must find ways to move beyond these largely false, vested interest manufactured divisions and work together on our massive common interests. Drawing in participants from across the political spectrum should be one of the most important goals of high-level system change collaboration.
Providing accurate, unbiased information about environmental, social and economic problems and solutions is another essential aspect of facilitating high-level system change. Vested interest controlled media regularly provides citizens with inaccurate, biased information. This appears to help vested interests in the short-term. But it degrades society by preventing people from acting on their common interests. As discussed, citizens collectively are the most powerful force in society. But they cannot exercise this power if they are falsely divided and given inaccurate information. To engage the public in driving necessary systemic changes, a main goal of high-level system change collaboration should be to publish honest, accurate information about problems and solutions.
High-level system change collaboration also should help the corporate and financial sectors to integrate mid-level and high-level system change into corporate strategies and investment decisions. The conclusion of the whole system book noted above also is published as a separate book – Global System Change: We the People Achieving True Democracy, Sustainable Economy and Total Corporate Responsibility.
This summary book provides extensive information about successful high-level system change collaboration. It provides a practical and profitable approach for engaging the corporate and financial sectors in system change, called Total Corporate Responsibility. The book also extensively discusses uniting citizens and providing them with accurate, empowering information.
High-level system change is extremely complex. No person or organization knows how to fully achieve it. Collaboration is essential. The most important action early on is to form the collaboration and begin working. We do not need to know all necessary actions beforehand. These will become clear as humanity devotes the time, attention and resources that this issue deserves and requires.
High-level system change is the most important sustainability issue. As this becomes widely known, people and organizations driving this work will be seen as the true sustainability pioneers. Current corporate sustainability leaders gain many benefits, including enhanced reputation, market share and profitability. The same will occur for corporate system change pioneers. History will look back on current business, political, academic and other system change leaders as the true heroes of this generation, in the same way that the US Founders are seen as the heroes of their generation.
There were extensive differences among the Founders, such as those between slave and free states and small and large states. But these wise leaders put the well-being of their country ahead of personal and vested interests. They reached compromises that produced one of the greatest nations in human history. This wisdom is needed once again. We must set aside partisan interests and work together on evolving economic and political systems into sustainable forms. The wisdom of nature surrounds and pervades us. As parts of nature, we innately contain this wisdom. Our prosperity and possibly survival require that we manifest the wisdom of nature in human society.
Frank Dixon oversaw the sustainability analysis and rating of the world’s 2,000 largest companies for many years as the Managing Director of Research at Innovest Strategic Value Advisors, formerly the largest corporate sustainability research firm in the world. Institutional investors used Innovest research to develop high-performing socially responsible investing products. Extensive corporate sustainability experience made it clear that flawed systems compel all companies to degrade the environment and society. Frank Dixon developed the TCR® approach to provide a practical and profitable way for companies and investors to engage in system change. Following Innovest, he provided sustainability and system change consulting to companies in the US and Europe. Most recently, he wrote the Global System Change series of books. Using a whole system approach, the books describe the major economic, political and social system changes needed to achieve sustainability and real prosperity.
Frank Dixon has an MBA from the Harvard Business School.
Copyright © 2017 Frank Dixon