System Change and the Sustainable Development Goals

Frank Dixon
October 7, 2017
www.GlobalSystemChange.com

The Sustainable Development Goals (SDGs) are one of the most important milestones in the history of the sustainability movement. They are widely embraced by developed and developing countries, businesses, NGOs and other organizations. The SDGs have the potential to drive substantial sustainability progress. But the 17 SDGs and 169 targets within them largely cannot be achieved without system change.

Modern economic and political systems unintentionally put business in conflict with society and humanity in conflict with nature. These systems, and the shortsighted thinking that created them, are the root cause of the major environmental, social and economic challenges facing humanity. Economic reform has been discussed for decades. But it largely has not occurred. Many factors indicate that society is declining and heading toward traumatic disruption. Political instability, environmental degradation, poverty, hunger and inequality are widespread or growing in many regions.

National, corporate and other efforts to implement the SDGs mainly are focused on incremental improvements in current systems. This is logical and practical in the short-term. But it will not bring humanity close to sustainability, especially in the time frame needed to avoid system collapse and traumatic disruption. SDG-focused work is excellent and should be greatly expanded. But a parallel or complementary system change effort is needed to achieve sustainability and real prosperity.

Effective evolution of economic, political and social systems into sustainable forms (high-level system change) almost certainly only can be achieved through a whole system approach. This article discusses limitations of the SDGs, the need for a whole system approach to system change, and how to implement it.

Sustainable Development Goal Limitations

The SDGs define and address many critical aspects of sustainable society. But they are reductionistic. When describing a sustainable system, one generally would not begin by discussing the parts. The most effective, logical and comprehensible approach usually is to first describe the whole system, and then discuss the parts in relation to the larger system that contains them. Starting out by discussing 17 aspects of sustainable society can produce inefficient, redundant strategies. A whole system approach illuminates root causes, systemic barriers, key leverage points and optimal solutions that often transcend or lie outside the issue-specific areas addressed by the SDGs.

The SDGs are comprehensive, but not complete. Several critical aspects of sustainable society are implied or not addressed. It appears that compromises were made to maximize national and business involvement. For example, democracy, a global bill of rights, religious freedom and population stabilization are critical aspects of sustainable society that are not specifically addressed in the SDGs. Instead, Goal 16 vaguely implies the need for democracy and human rights protection. Specifically addressing these factors might have inhibited participation by countries that suppress democracy, violate human rights, favor particular religions or have high projected population growth.

Emphasizing sustainable economic growth, and high economic growth in the least developed countries, potentially inhibits achievement of the environmental SDGs. The measured and managed focus of sustainable society should be on maximizing the objective long-term well-being of society, not economic growth. But promoting this focus in the SDGs could inhibit business participation. Making the goals nonbinding and emphasizing sustainable economic growth enables businesses to remain primarily focused on their systemically mandated requirement to maximize profitability and shareholder returns.

The SDGs are structured in ways that maximize national and corporate participation. They establish ambitious targets for 2030. The goals will substantially benefit humanity. But a much greater focus on system change is needed to achieve the SDGs and true long-term prosperity.

System Change

The failure to think and act from a whole perspective created the need for the SDGs. In reality, all major aspects of society are connected. The economic is not separate from the political, social, environmental or even psychological, spiritual and religious. But the human mind did not evolve to consider everything at once. As a result, we broke the whole system of human society into parts and developed theories and systems that ignored major aspects of reality, a process known as reductionism. This produced unintended consequences, such as widespread environmental and social degradation.

Flawed economic and political systems unintentionally put business in conflict with society. Very generally speaking, companies can mitigate about 20 percent of short-term and long-term, tangible and intangible, 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 long before reaching full impact mitigation. Flawed systems force all companies to degrade life support systems and society.

The failure to think from a whole system perspective (myopia) also often compels individuals, governments and other organizations to degrade the environment and society. They see short-term benefits, but frequently do not understand the longer-term problems caused by their actions. Myopia and resulting flawed systems put humanity in conflict with nature. These are the root causes of environmental, social and economic problems. Attempting to resolve these problems without changing the systems that caused them in the first place will not work. The primary focus should be on root causes (flawed systems), not the results or impacts of these systems (problems addressed by the SDGs).

Flawed systems often present business and society with harmful and non-harmful options. The sustainability movement largely is focused on helping government, companies, other organizations and individuals to choose non-harmful options. But if we had sustainable systems that took all relevant factors into account, only non-harmful options would be profitable and legal. Environmental and social problems largely would resolve themselves, thereby making the SDGs and sustainability movement far less necessary.

Corporate and government strategies to address the SDGs mainly are focused on the sector or issue-level. Strategies usually vary based on the issues being addressed. This often causes redundancy and limits effectiveness because business and government resources and focus are spread across many different objectives. More importantly, overarching economic and political systems severely constrain sectors and issue-specific progress. This substantially limits the effectiveness of sector or issue-focused strategies. Flawed systems make it impossible for business, government and society to mitigate many negative impacts, and thereby achieve the SDGs.

Major environmental, social and economic problems all have a common root cause – flawed ideas and systems. As a result, they have a common ultimate solution – evolving flawed, myopic ideas and systems into sustainable forms. Focusing business, government and society on common causes and solutions vastly improves efficiency and effectiveness. Companies in essentially all sectors work to achieve similar goals.

A whole system approach is essential for achieving high-level system change. Economic reform efforts over the past 50 years often had limited success because they were reductionistic. They frequently focused on addressing one or a few economic systems flaws, such as externalities or overemphasizing economic growth. But the economy is a sub-element of human society, which is a sub-element of the whole Earth System. Effective economic reform requires addressing all relevant factors. Many of these lie outside the economic area, such as political reform and empowering citizens to act on their common interests.

A whole system approach would first envision a sustainable whole system, and then address the parts in relation to it. One way to do this is to imagine nature as if humans never existed. In nature, one would see nearly infinite coordination, symmetry, sustainability and long-term prosperity. Nature creates no waste, equitably distributes resources, implicitly values current and future generations equally, lives on renewable resources, decentralizes production, seeks balance instead of growth, and enables nearly all plants and animals to reach their fullest potential. Adding humanity to this system and retaining the same high levels of resilience, sustainability and long-term prosperity provides a good model for sustainable human society.

With this sustainable whole system in mind, we can envision the subsystems and systemic changes needed to achieve sustainability and real prosperity. One of the most important requirements for sustainable economic and political systems is stated in Target 16.3 of the SDGs – promote the rule of law. This principle says that individuals and businesses should be free to do what they want, provided that they cause no harm. The rule of law generally is applied well to individuals. They are held responsible through murder, assault and many other laws. But the principle is applied poorly to businesses in many countries. They are allowed to cause extensive environmental and social degradation (harm).

Failing to hold companies fully responsible for negative environmental and social impacts (i.e. failing to effectively apply the rule of law) is one of the most important overarching economic and political system flaws. This is the general mechanism that places businesses in conflict with society, and thereby compels them to degrade the environment and society.

There are many specific economic and political system flaws that fail to hold companies fully responsible for negative impacts. 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 in the US, 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).

One way or another, humanity’s flawed economic, political and social systems will be transformed. Either we will figure out how to change them voluntarily, or nature and reality will change them in a highly traumatic manner. All flawed, unjust human systems change, usually by collapsing. This occurred with the American and French revolutions, end of slavery in the US and fall of communism in the Soviet Union.

System change is implied in the SDGs. Discussion of inclusive institutions and society implies sustainable political systems based on democracy. Discussion of sustainable infrastructure and production implies sustainable economic systems. However, the SDGs are not specifically focused on system change. Rapid and widespread high-level system change is needed to achieve the 2030 targets and avoid system collapse. This almost certainly will not occur through many uncoordinated efforts focused on the various SDGs. Vastly greater, well coordinated high-level system change efforts are needed at the regional, national and international levels to achieve the SDGs and true long-term prosperity for humanity.

Implementation

A whole system approach to high-level system change would address all relevant factors. Many actions are needed in different areas of society. As noted, a primary overarching economic and political system flaw in the business area is the failure to hold companies fully responsible for negative environmental and social impacts. Only government can do this. But governments that are heavily influenced by vested interest, such as the US government, are unlikely to change themselves, for example, by effectively applying the rule of law to businesses. Several key leverage points for political reform lie outside the government area. These include influence from the corporate sector, financial sector and general public.

Engaging the corporate and financial sectors in system change requires making a strong business case and providing practical, profitable engagement methodologies. The corporate business case for system change is strong and clear. Flawed systems place business in conflict with society, and thereby compel companies to degrade the environment and society. This creates problems for business. As the human economy expands in the finite Earth system, negative corporate impacts return more quickly to harm companies, often in the form of market rejection, lawsuits and reputation damage. Companies have strong financial incentives to reduce negative impacts. But they only can mitigate about 20 percent on their own. System change is required to eliminate the remaining 80 percent.

Another aspect of the corporate business case for system change relates to the SDGs. Many companies are integrating the goals into their sustainability strategies and pursuing sector-level business opportunities related to them. But as noted, economic and political systems severely constrain sectors and make achievement of the SDGs largely impossible. High-level system change will greatly accelerate and expand sector-level, SDG-related business opportunities.

A whole system change approach called Total Corporate Responsibility (TCR^®) provides a practical and profitable way for companies and financial institutions to engage in system change. Developed in 2003, the approach defines two broad levels of system change – mid-level and high-level. Mid-level system change involves systemic changes at the sector, stakeholder or environmental/social issue level. As noted, high-level system change refers to evolving overarching economic, political and social systems into sustainable forms.

System change is so complex that it only can be achieved through collaboration. A growing number of companies are collaborating at the sector level (mid-level system change). This enables them to reduce impacts more than they could on their own. However, there are few opportunities for companies to engage in high-level system change. This is the most important sustainability issue because overarching economic and political systems largely control and constrain business and society.

TCR provides a system change roadmap for mid-level and high-level system change. Holding companies fully responsible for negative impacts, and thereby eliminating conflicts between business and society, could reduce profitability. This might inhibit business involvement in system change. TCR seeks to overcome this potential barrier by helping companies to see that system change is inevitable. Flawed systems are causing extensive environmental and social degradation. They almost certainly will change soon through voluntary or involuntary means. Companies are much better off proactively collaborating and managing the system change process, rather than suffering the consequences of inaction.

The financial sector business case is similar to the corporate case. Flawed systems create growing problems for business and society. This creates growing problems for investors. Over the past 40 years, the socially responsible investing movement (SRI, also known as impact investing) has grown to over $20 trillion globally. System change-based funds have the potential to capture a substantial share of this market. They can provide far greater sustainability benefits than any other type of SRI (because they are focused on the most important sustainability issue), while providing superior financial performance.

Financial institutions sometimes analyze corporate performance on the SDGs and use this to guide investment decisions. But corporate system change performance is far more important and financially relevant. The TCR approach helps financial organizations to integrate mid-level and high-level system change analysis into environmental, social and governance research and develop system change-based investment funds.

The book Global System Change: A Whole System Approach to Achieving Sustainability and Real Prosperity extensively describes the many actions needed to evolve human systems and society into sustainable forms. The last ten percent of the whole system book is published as a separate book, called Global System Change: We the People Achieving True Democracy, Sustainable Economy and Total Corporate Responsibility. Chapter Eight of both books describes the TCR model and how it can be used to engage the corporate and financial sectors in system change.

The Global System Change: We the People book summarizes many problems and solutions discussed in the whole system book, such as establishing sustainable political, economic and financial systems. However, the book is mainly focused on the most important action needed to achieve sustainability and real prosperity – uniting and empowering citizens to work on their massive areas of common interest, such as establishing true democracy, using the public wealth to equally and fairly benefit all citizens, and protecting environmental life support systems.

Citizens collectively are the most powerful force in society. No business or government could resist united public pressure to change. But unfortunately, as the Founders of the US well knew, it often is easy to mislead non-expert citizens. They usually do not have the time needed to study complex environmental, social, economic and political issues in-depth. This makes people highly vulnerable to vested interest deceptions. The primary deception is to divide citizens into debating factions, such as conservatives and liberals. When the people are divided, they are conquered. Public deception and division frequently make it easy for vested interests to unfairly control government and concentrate public wealth.

The Global System Change books clearly explain how to engage the corporate and financial sectors in system change, unite and empower citizens, and take every other major action needed to achieve sustainability and real prosperity. The SDGs are an important milestone in the sustainability movement. But the most important milestone has yet to occur. This involves largely shifting the focus from company and sector-level changes, such as those being pursued under the SDGs, to high-level system change.

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.