Long in the murmuring, it’s finally happening. Our first Practitioner Dialogue and Retreat will be on 27-29 October at the historic Mont Fleur, Stellenbosch. (Do you remember the Mont Fleur Scenarios that sketched stories of South Africa’s possible future in 1992?). If you are reading this, please join us! You are a sustainability practitioner.

The 2.5 day in-person event targets senior practitioners who have been grappling with the uphills, downhills and ineffabilities of this field for a few years. The Chatham House Rule will apply. We will speak openly about what it’s like to be practitioners in a time of accelerating pressure, risk and opportunity. In a field that is still forming. Where many of our organisational colleagues hold wildly different ideas on what it’s about. Where ideas may be underpinned by worldviews often held unconsciously – our own as much as our colleagues. We will explore what works for us; what we’d like to see more of and less of; and whatever comes to mind.

Topics are arriving from signed up participants – most of whom lead the sustainability transition for their companies (primarily large corporates across all sectors and already our valued clients). Examples include:

• Approaches and tools that work in the face of complexity
• The slow pace of leadership change (in mindset / worldview and/or position)
• The growing breadth of the Sustainability / Just Transition Agenda with teams the same size or shrinking…
• The challenge of self-proclaimed ESG experts – where a little knowledge is usually dangerous
• The Data Divide… everyone wants ESG data but what to track – and who should track it – is a lot less clear
• The difference between standardised disclosures and strategic indicators
• The question of culture
• Practitioner burnout (need I say more?)

And so on – no topic too big or too small. These will feed a programme of:

• Open / lightly facilitated discussions
• Possible inputs where appropriate
• Participative processes, etc.

We’re adding a sprinkle of (optional) embodied practices from our personal experience – trail running, breathing, Qi Gong, wilderness work, good food… okay, the last one is Mont Fleur’s contribution, along with serene space and fresh mountain air.

It all leads to a space for dialogue, enquiry, playful explorations and solution-seeking.

What else is there to do? A few places remaining. Contact Nicola at nicola@incite.co.za.

This post is a follow-on from an earlier post on how to develop Sustainability framework. It shows how you can turn your business model into a canvas to make your profit-enabled social/environmental impact (PEI) opportunities explicit. This in turn helps you focus your strategic integration effort.

In their seminal article in HBR (2011), Porter and Kramer identify three pathways for Creating Shared Value (CSV). These were:

• Reconceive products and markets
• Redefine productivity
• Improve the social ecosystem.

Note: I have learnt to avoid the term ‘shared value’ because it’s easily confused with ‘shared values’. When the conversation shifts to values, the profit story tends to take a back seat. I use the term ‘Profit-Enabled Impact’ instead of CSV because while values are important, value tends to trump when the shit hits the fan. And this is inevitable.

Anyway, I remember feeling underwhelmed by CSV at the time – it offered little beyond what sustainability practitioners had been exploring for the better part of two decades. While that may be true, those three pathways turned out to be a useful way of framing our work on profit-enabled social/environmental impact, not least because they mapped so nicely onto our business model canvas. You’ll also see that I have changed the wording a bit to align with our approach. It’s not important – use whatever words make most sense to you.

The Profit-Enabled Impact (PEI) Canvas starts with the business model (that smaller rectangle in the centre). By depicting your business model in this way, you will quickly get insight into products, capabilities, partnerships and tech that might be repurposed to deliver social/environmental impact. By extending this into a PEI canvas, you are going to make your PEI opportunity envelope explicit.

Start with your current envelope: Where are you already exploring PEI? Some of these will be regarded as “sustainability initiatives”, many will not. This shows how entangled we have become with what investors want us to disclose… and the extent to which this has hijacked the broader transition to integrating material sustainability considerations into every decision.

So start with what you’re doing already:

• What products, services and customers already support a low carbon / circular / inclusive economy? Link these overtly to the revenue drivers in the profit formula.
• What productivity enhancements already support a low carbon / circular / inclusive economy? Link these overtly to the cost drivers in the profit formula. Note that we are not looking for productivity improvements that simply make it cheaper to produce and flog more widgets. We are looking for productivity improvements that tangibly reduce resource throughput relative to the current previous approach.
• How are we already improving the social or natural ecosystems that feed the profit formula? This supports your deliver systems (key activities, resources and relationships). It will impact the profit formula, but usually in the medium to longer term. It still counts, and anyway, a new regulation can change the time horizon overnight.

This recognises that PEI is not only possible but inevitable. It also shows that you are not starting from a zero base. This is useful for all sorts of reasons so avoid omitting this step because it’s ‘obvious’.

Now bolster your emerging opportunity envelope with research on your peers: Where are they exploring PEI? Which of these are more likely to find a place to express within your current and emerging business model? If there’s potential, someone in the group will probably see it. (This is why we do this work with a group of people that is as diverse as possible and who all have experience in different parts of the value ecosystem. If you still think diversity is about meeting your BBBEE requirements, it’s time to stop and reflect a bit.)

Avoid getting hung up on the three categories. Some (actually many) initiatives deliver in more than one area, which becomes the whole point of the process over time. It doesn’t matter where the pattern goes – it matters that it has potential expression through the business model. You’ll get to the actual expression when you start activating the prototypes.

To be sure, this process gets easier with experience. Just start and see what happens. The more diverse the team, the better.

Incite’s Ideator is a facilitation tool aimed at making this process easier and more inclusive.

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Iconic shared value creators, fungi provide trees with nitrogen and phosphorus from decaying matter in exchange for sugars from the roots. Banner pic cropped from a photo by PICSAR on Unsplash.

When a company seeks strategic integration of sustainability, they are working out how to:

1. Protect their current business model; and
2. Increase value creation

at their intersect with society and the natural environment.

Protecting the current business model (BM) requires companies to work out which social/environmental impacts (inside-out) and which social/environmental trends or pressures (outside-in) pose risks to the way they do business. Increasing value creation requires companies to work out how they might improve the profit formula or the delivery system while enhancing their delivery of positive social/environmental impact.

ESG disclosure guidance – including that from the JSE, the TCFD and the IFRS – tends to focus on value protection. Investors are worried about risks to their investments and have categorised the obvious ESG risks on a sectoral basis. Opportunities to increase value creation (the second point) are less obvious. These generally result from new products, process improvements and ecosystem enhancements.  A myriad combinations of tech, capabilities, assets and partnerships exist that might deliver positive social/environmental impact through the BM. The trick is to whittle this down to a few options with genuine scale potential because you can’t afford to invest in every option. You also can’t afford to ignore the potential for scalable social/environmental impact already present in your operating system.

Whether you’re looking at ESG risks or opportunities for profit-enabled impact, the starting point is the business model. How your business creates value. Business models get depicted in various ways and it makes sense to use the framework you know the best. The one we use is adapted from on Clayton Christensen’s basic four elements.

We make a point of highlighting differentiators within the model. What makes you different from your competitors? You already know the answer to this question and the business has channelled investment into these areas over time. If you can link these to your potential for positive social/environmental impact, you have greater prospect of scaling your sustainable proposition. Repurposing existing capabilities to deliver positive impact is less energy intensive and quicker than creating new ones. This improves speed to market and allows a more urgent response to social/environmental trends.

See how to turn your Business Model Canvas into a Profit-Enabled Impact Canvas here.

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Banner photo by Slidebean on Unsplash

I’m belatedly back to blogging with a post on strategy. It will refer you to some of our tools and should help you deliver a useful intervention for sustainability integration. An overarching strategic framework that is unique to your organisation and that guides sustainability-related decision-making is generally worth the effort.

An organisation’s intersect with society and nature is omni-present and complex.  Strategic integration should make it easier to identify sustainability investments that have potential to scale. Win-win solutions are not always possible, but they widen the possibility space. Making complex issues requires a genuinely diverse range of views. making sure your framework is clear and easy to understand makes this possible.

The framework should help any stakeholder understand your:

• Direction: What ‘forwards’ means for you;
• Ambition: How far and fast you want to go;
• Focus: How you intend to allocate your energy, in broad terms.

Too many organisations hop lightly over points one and two, and apply their minds to quantitative sustainability commitments. It may take a year or two to realise that the first two elements were not as obvious or expendable as they thought.

This five-step strategy primer should help you avoid this costly detour:

1. Understand where you are before tracking trends

Who are you? How did you come to be where you are? Why do you create these products and services? WHy do you distribute them in this way? Once you have insight into these kinds of questions, recognise that they bring you into relationship with trends. From megatrends to local mutterings, trend intel is freely available and expanding by the hour. To make these trends real, ask people to tell you how they are expressing locally.

2. Learn the language your organisation uses to speak about capability

What are your capabilities? How do people talk about them? Which are more or less strategic? To reflect on how your capabilities relate to sustainability, try Incite’s sustainability capability spectrum (‘The Waves’).

3. Use VIROS to help you make sense of your intersect with society and nature

Sustainability issues are highly interconnected. This means that your strategy process gets messy. Some of the ways your organisation intersects with society and nature are unique; some of the ways are unique. We want to know both because this is how you differentiate your response. A common mistake is to confuse sustainability strategy with disclosure. In disclosure, we align with what is expected; in strategy, we look for something special. Before we hunt, we scout the territory. Incite’s VIROS framework can be used to inform a conversation on your organisation’s intersect. By repeating these conversations every year, people become more familiar with the intersect.

4. Use the potential for Profit-Enabled Impact (PEI) to engage diehard business minds

You know that it is possible to scale your positive impact through the business model. If you’ve been tracking the field, you also know that it is far more difficult to put into practice than the theory suggests. How do you help the organisation cut through overwhelming opportunity to zero in on things that have a greater likelihood of success? (You don’t do it by going with the Chairman’s pet project or a blind guess.) One way is to see what is already finding traction in the broader ecosystem – your own and those of your peers. This puts tiresome sustainability report to very good use!

When creating a framework, we do this at a high level; when moving into sustainability ideation, we deepen the analysis into a more granular set of patterns that are specific to your organisation. We blend this approach with what Dave Snowden (of  The Cynefin Co) calls the ‘next right step’ approach to strategy. It recognises that complex systems are inherently unpredictable and that re-purposing existing assets and capabilities incurs less energy cost than investing in new ones. Given the scale of the sustainability challenge and the speed at which your competitors are moving, it makes sense optimise the energy you invest in this space.

5. Identify your strategic focus areas and describe them using heuristics

PEI pattern analysis highlights the broad areas where your organisation is more likely to scale its positive social/environmental impact. Cluster these into broad focus areas. Iterate and improve. Ideally end with three. These strategic focus areas will be enabled by several cross-cutting capabilities. (Think culture, innovation, tech, partnerships that will help you respond more quickly and increase your range of options.) Engage with your colleagues to identify which are the most important. To show alignment with the relevant SDGs, link them to the strategic focus areas: that’s where you are more likely to scale impact.

A few final suggestions:

• Build some flexibility into your focus areas. When we are not sure how we are going to make things happen, heuristics are more useful than goals. This flexibility doesn’t make you a laggard – it keeps you open to possibility.
• Your focus areas and the enablers that support them form a decision-making framework for the entire organisation – not a plan of action for the sustainability team.
• The framework should highlight where you need further analysis. You analysis will get more granular as you get more tangible. There will be a lot of things, but now you should be allocating energy with eyes nicely open.

That comes from my friend, film-maker and anthropologist Paul Myburgh, who taught me the bushman greeting Tsamkwa/tge? Are your eyes nicely open?).

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Banner photo: Flock of pigeons scattering by JJ Shev on Unsplash.

“It’s a bit of a zoo…”. WBCSD President Peter Bakker’s apt summation of the ESG/sustainability disclosure arena last year. With the official launch of the ISSB this month, there’s been some trumpeting about how nicely things are coming together. There’s convergence and there’s no doubt the Value Reporting Foundation is facilitating some useful discussion. We also see evidence of a troublesome split…

Those familiar with evolutionary biology may recall Haeckel’s law that ‘ontology recapitulates phylogeny’. It refers to the astonishing fact that an animal embryo goes through stages during development that are a chronological replay of that species’ past evolutionary forms.

Is something similar at play in the evolution of ESG disclosure? Despite major efforts by the respective world bodies, significant differences remain between the financial accounting practices in the United States and the rest of the world. With international moves to standardise sustainability disclosure, true to form, thirty years of dogged effort by the Global Reporting Initiative and the EU’s non-financial reporting experts appear to be sidelined by the ISSB. It’s irritating, but we should not be surprised.

Luckily for me, Hanks tracks all this stuff with a passion. I occasionally receive an expletive-filled WhatsApp from some conference or webinar he’s moderating, but generally he stays enviably calm in the face of it all. We both think integrated reporting and sustainability disclosure fall well short of their potential, despite close to a decade of practice. When he’s not threatening to throw it all in and go fishing, I suspect this reality keeps him working and reworking the way we present it.

Here’s his latest sketch on materiality and ESG disclosure, drawing on materials developed by the GRI, CDP, CDSB, VRF and IFRS. I’ll leave you to navigate the acronym soup. The framework is prefaced by a few broad statements, all of which should be obvious.

An organisation impacts its stakeholders and the natural environment. In turn, stakeholders and the environment affect the business and its performance. These impacts may be positive or negative and will vary in time.

Organisations report these interactions differently depending on the target audience. Three broad arenas of reporting have emerged, addressed by various international disclosure standards and initiatives.

In our minds, teams of intrepid integrated reporters go forth and help to save humanity… The reality will be far more tedious as disclosure practitioners are generally miles away from where decisions get made.

(NOTE: I am hoping to be proven wrong here… The ISSB and GRI announced a collaboration agreement on 24 March 2022 and we might be seeing the start of something encouraging.)

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Banner pic is a plate from Ernst Haeckel’s Evolution of Man (1879) comparing vertebrate embryos. Source: https://publicdomainreview.org/essay/copying-pictures-evidencing-evolution

Disclosure and strategy should work together in a process of eternal renewal, symbolised by the Ourobouros and the snake in the banner pic. Right now, most of us are neck deep, responding to disclosure guidance and, though it may feel eternal, there’s nothing renewing about it… It feels more like a snake waiting to bite.

Double-entry accounting – which separates an entity’s resources from claims on those resources – was developed in 1494 by Italian monk Luca Pacioli. Narrative entries tracking barters pre-date this by at least 5,000 years. (These and other interesting facts courtesy of Investopedia.) The International Integrated Reporting Council (IIRC) published its <IR> framework in December 2013, informed by about three decades of social and environmental reporting. Early steps became great leaps when mainstream investors saw the extent of ESG risk bearing down on their portfolios. ESG experts spun the wheel and floored the accelerator of a system that had gathered momentum over thousands of years. It was bound to hit a few snags.

One of those is simply being able to keep up with the changes: Puma’s early exploration of environmental profit and loss; blockchain-inspired calls for distributed governance models and ‘Triple-Entry Accounting’ to combat manipulation and financial fraud; ‘rich data’ that combine the insight of personal narrative with the scale of big data’. On a more basic level, companies that understand a bit about social change are battling to work out which metrics provide reasonable indicators of things that are useful to know.

Here’s a sketch to help you navigate the basics:

The sketch makes a few points, including:

ESG raters track more data than they request. The range of data they scrape from the web is expanding all the time. This is good news. They got that media release on your recent lower-cost offering in pursuit of new, underserved markets. They also picked up the controversies the Board instructed you to omit from the sustainability report. When planning your disclosure, keep the big picture in mind and back up written communications with in-person engagement, particularly with long-term investors.

Your strategic indicators are potentially unique. They track areas where you make a difference, based on your demonstrable ability to control or (more likely) influence impact. They are not selected from a standardised list of disclosures. While no guarantee of improved ratings (find more on why here), ESG differentiators put you in line to attract what my friend Phil Barttram calls ‘smart capital’. Today’s smart capital understands that a company’s value is inextricably linked to its multi-horizon impact on social and environmental systems – even if the feedback is not obvious today. It asks probing questions about tipping points and pivot points. Smart capital is discerning. Be prepared to sell your ESG effort on its unique insight and contribution, not simply better ratings.

ESG disclosure standards and expectations are a good place to start. The launch of the International Sustainability Standards Board signals early stage convergence, even if not as all-encompassing as they suggest. If you haven’t done so already, get down to listing and cross-referencing the disclosure expectations of SASB, the GRI and the ESG raters used by your largest investors. (Here’s an example of a comprehensive and accessible ESG data book from BHP Billiton.) Phew. Of course, all the lines on the sketch are dotted and issues can shift around as easily as algorithms can. And then there’s the juicy stuff which lies in relationships between the issues, which are about context not content. In other words, depending what you do and where you are, decarbonising your value chain may be as much about potential job losses (just transition) as it is about Scope 1, 2 and 3. While accordance with standards and guidelines gets you well down the track on disclosure, be open to stripping those compliance blinkers off as readily as you put them on.

Our general advice for practitioners: transition your ESG reporting and disclosure to digital as soon as possible. Apart from a stellar upfront narrative, much of your Sustainability Report and ESG data books should be writing themselves. ESG disclosure is the tail-end of decisions and action at the ESG intersect. It is prefaced by smart strategy and the steadfast development of even smarter metrics. Good disclosure invites a response, which should feed back to inform and enrich decision-making.

As I said, disclosure and strategy should constitute a process of eternal renewal. ESG disclosure should help us come alive, not drown in muddy depths.

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Banner image cropped from a photo by Jan Kopřiva on Unsplash

In Pathways to resilience, I wrote about seeing performance in two dimensions. The sustainability practices of high performers are both wide-ranging and deep. They have developed ways:

1. To protect, create and enable value at their intersect with society and nature (breadth); and
2. To access the resources needed to continue their practices in the face of disruption (depth).

Organisations whose capabilities have both range and depth are likely to be more resilient. What they do may change, but they are more likely to survive with their identity intact. This is based on Snowden’s definition of resilience which is “survival with continuation of identity over time”. (Dave Snowden is the founder of The Cynefin Co and much of this blog series is informed by his complexity thinking. I am retooling my IP to keep it useful.) How do we deepen our practice? Again drawing on Snowden, I see three aspects of Sustainability practice that generally tell us an organisation is getting more mature. These are:

1. Establishing a set of basic practices that help them make sense of their intersect with society and nature
2. Coordinating these practices better at the centre
3. Distributing sustainability practice (such as sense-making, risk detection and ideation) to where the organisation intersects with society and nature.

This is invariably an iterative process which is why I had to stop referring to these as “levels”. We might reflect afterwards and realise that all these aspects are addressed in our organisation, but we can’t know the best order for us to develop them at the start. Given that most of us are schooled in linear thinking, you might disagree with that, so let me take a step back to explain where it came from. My first corporate job was in the automotive sector. It was 1995, democracy had arrived and South Africa was rainbow-hued and brimming with potential…

Kaizen means ‘change for the good’. The Japanese management philosophy is usually translated as ‘continuous improvement’ and in the mid-nineties it permeated the Nissan SA factory at Roslyn, north of Tshwane. As their newly appointed Environmental Manager, I was part of a team implementing the ISO 14 001 Environmental Management System Standard launched the previous year. The Kaizen areas – where factory employees met every morning to share ideas on how things could be improved – were turning out to be integral to its implementation.

Nissan’s burly plant engineer, Chris Jansse van Rensburgh, was also big on the Gemba walk, a Japanese practice by which managers walk around looking for improvements (aka ‘Management By Walking Around’). Chris’s big thing was compressor leaks and he found enough to significantly decrease the electricity usage in the plant. (South African electricity was reliable and dirt cheap in those days, so this was quite a novel idea). As he tracked the trends Chris noticed that the local municipality had been undercharging the plant for several years due to a decimal error. Being an honest chap, he duly informed them, and an agreeable back-payment was negotiated. Despite the unintended consequence (I had over-confidently assured the CEO John Newbury that ISO would yield both environmental and cost benefits), Kaizen and Gemba were clearly critical to the process. While necessary for certification, the reams of ISO-compliant procedures I was helping them to write were like chaff by comparison.

Nissan duly gained the first automotive certification in the southern hemisphere which pleased them greatly; and a green-behind-the-ears industrial ecologist gained an unexpected lesson in distributed sense-making and informal networks – although she didn’t realise it at the time. With 20-20 hindsight, I can see rationally what I intuited then: that there were many environmental practices already underway at the Nissan plant. They just didn’t see them as ‘environmental’. Requiring increasing levels of depth, they were:

• Clarifying sustainability practice. Informed by best practice as codified in ISO 14 001, our team was busily writing up environmental policies and procedures, dropping them into an accessible database and auditing the paintshop, bodyshop, trimshop, etc., for compliance. As we clarified our practices and aligned with ISO’s expectations, some improvements were made along the way.
• Coordinating sustainability practice. Care for the environment was not a priority in the factory culture, but safety, health and quality were. Integrating environmental practices into existing safety and quality systems was a small shift and helped improve coordination. Environmental responsibility had already found traction in the CEO’s office: Newbury was one of a handful of South African execs who recognised environmental trends and their competitive implications at an early stage. (As a young graduate, I had written to Nissan requesting a bursary to study industrial ecology. Newbury called to interview me personally on a real car phone… I am indebted to his vision.)
• Distributing sustainability practice. Fortunately for Nissan (and me), the plant’s distributed sensory network – the informed eyes, ears and hands of the workers meeting every morning in the Kaizen areas and its Gemba-walking managers – did the rest.

Nissan’s environmental effort started at the last bullet point. Without this, the first point would have been far more difficult and I doubt ISO certification would have been achieved as quickly. I suspect somewhere in all of this is a framework for maturity of sustainability practice and a way to think about sustainability practice as a path to resilience. I’m not there yet but I can make a general point: movement towards resilience is unequivocal. When we take our practice to another level (oops, there’s that word again), everything changes. This happens personally and I think it happens in organisations. It may include what Snowden calls a phase shift and I suspect I’m touching on it when I write about accessing energy at the intersect in The Waves II.

I think the unequivocal nature of this shift helps us to maintain identity over time.

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Banner image is a photo by Sanni Sahil on Unsplash. Through my lens, it reflects the process of the moon ‘coming to fullness’ as expressed in the Zulu term ukuthwasa. The term describes the process of traditional initiation that catalyses a deep shift in cognition, necessary to graduate as a practitioner.

In 1999, I was a silly young consultant who had no business flying halfway across the world to a diamond mine in the East Kimberley region of Western Australia to help make sense of their environmental risks. I had barely begun to make sense of myself.

On that occasion, I blundered across a songline and sacred site with no respect and even less awareness. Whatever actually happened, it catalysed a personal crisis that veered way beyond my control. Two weeks later, I returned to South Africa, home of the global diamond monopoly, sick and shaking. I was lucky enough to be mentored by people who knew how indigenous Africans have worked with human-nature relations for millennia. Eventually I began to understand, though it took me another 20 years to fit things together. I had a lot to unlearn.

Sustainability strategy must address our intersect with society and nature.  The epitome of dynamic, new sticky issues emerge every week as this intersect grows to constrain and influence business operations. The spreadsheets and methods we use to understand this intersect are vastly different to those that evolved with us over millennia. Our ability to make sense of the world evolved before science had  succumbed to its present splits and assumptions of objectivity that determine what’s real. Our encounters with nature and communities – both human and more-than-human  (to use geo-philosopher David Abram’s words) – found wonder and wildness, danger and opportunity in equal measure. That hasn’t changed, though our response has.

So, when we find ourselves at the blunt end of a Zoom session voting on the relative importance of 12 (that’s what Mentimeter stretches to) ‘material matters’, our animate intelligence senses something amiss. Whether we notice or not is another question. What we do with it is yet another.

Sense-making pervades our work as sustainability practitioners. We call it materiality analysis in deference to investor jargon for disclosure on risks that might derail their investment. Reflecting backwards on what was material over a given reporting period is tricky enough; reflecting forwards – to inform strategy at our ESG intersect – is far more difficult. I prefer the word sense-making.

When we use sense-making to inform strategy, we seek a handle on what matters, why it matters, how much it matters and in what direction its matteriness may be moving. (To coin a term from my six-year-old’s current interest in Winnie the Pooh.) Whether we are six or older, this is quite a lot to juggle. But especially so when we are older because most of us have learnt to think in categories: one list of things that matter; another for those that don’t. Of course, Covid-19 just blew our neat categories away. We’ve realised that it’s not about the things on our lists: what really matters is the relationships between the things – on our lists or not. Which takes us to an entirely different space.

I was taught a particular approach to sense-making (although it wasn’t called that) when I began my training as a diviner of the Southern African Tswana-Shangaan Majoye lineage in 2002. Learning to divine – or ‘throw the bones’ – is part of the indigenous cure for the sickness I arrived home with from Argyle Diamond Mine. Learning the hakata was arduous and frankly unpleasant as my teacher sliced uncompromisingly through my disposition to analytics of the ‘best practice’ variety. Weeks of sweat and nausea would give way to little epiphanies as patterns started to appear in the tumble of bones on my mat.  A few days of joy would follow, and then the sweaty cycle would begin again. Graduating as a diviner did not mean I had to abandon reason; it required me to reason in a different way.

I value my education from both the University of Cape Town and Yale School of Environment, but it came with a cognitive tax that I could not foresee. I studied at a time when only the quantum physicists had encountered directly the limits of matter and whether we were able to know it in the first place. They decided that we couldn’t, which led to a lot of innovation. For better and for worse. Tyson Yunkaporta shares this insight and much more in his inspiring book, Sand Talk.

As we recognise the entangled and unpredictable nature of sustainability issues, we’ve reached the limits of expert consultants and best practice guidance that rely on what worked before. Making sense of things at the requisite level of granularity requires another way of seeing – what my mentor Niall Campbell calls ‘tracking’; what Yunkaporta refers to as ‘pattern-mind’. Either way, we’re well beyond the comfort zone of most boardrooms and business teams.

An interim solution is to find a materiality process that engages with complexity at least better than the last one. Thanks to Covid, these are emerging thick and fast from consultancies, though you can be sure they’re not all as complexity-fit as they claim. Incite’s VILROS materiality framework is based on an iterative process of sense-making and sense-checking. We’ve always avoided lists and voting, and we’re finding ways to apply it in a more complexity-fit way. But it’s still early days.

I am excited about working with Sonja Blignaut, founder of More Beyond, to see how applied complexity tools could feed more insight into this process. SenseMaker’s digital platform can gather and analyse, at scale, a diverse range of real experiences and perceptions from a company’s intersect with society and nature. The perceptual landscapes generated by SenseMaker’s digital analytics are reminiscent of the bones, but the outputs are more decision-useful for executives.

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Banner image overlays a photo of me as a student in Botswana in 2002 (original: Marilyn McDowell) and some of my ‘bones’ (traditional divination tool).

In The Waves, I shared our Sustainability Capability Spectrum. It shows how companies deliver more value as they expand their range of capability and action at their Sustainability Intersect. The Waves generally elicits a good discussion – even online, thanks to the real-time feedback of Mentimeter. A Cheshire cat kind of point we make about The Waves is that ‘you are where you are’. And where you are is fine – unless you want to be somewhere else. It’s not for a consultant to tell you what capabilities you need.

Being honest about your range of capability is more useful than trying to talk up your game in the absence of evidence. Obvious point, but one lost on many corporates and all brand agencies. Scan the integrated reports of the Top 100 on the JSE to see how many companies claim to be ‘Creating Shared Value’ (what I call Profit-Enabled Impact at scale) without much to show for it.

A second point, also obvious, is that focusing on Profit-Enabled Impact doesn’t mean you no longer manage ESG risk. Companies do well to develop the ability to protect and create value at their intersect simultaneously. The actual capabilities are revealed in time, but in general companies need different capabilities to protect, create or enable value. In The 2% Company, practitioners from the BCG Henderson Institute write about the tiny fraction of companies that excel at exploration and exploitation simultaneously. They are not talking about Sustainability, but the underlying point is the same:

Being excellent at both exploration (new ideas and innovation) and exploitation (operational proficiency and efficiency) simultaneously is difficult because these activities are contradictory; they pull companies in different directions. They require different skills, different performance management, and an ability to drive success with different time perspectives.

This helps to explain why companies struggle to place the Sustainability function within their organisational structure. For them, Sustainability is either ticking the box to protect value (putting the function into safety, human resources, finance, risk management or corporate affairs) or its about innovating to create value (putting it into strategy, R&D or sometimes the CEO’s office). Of course, Sustainability isn’t a function, it’s cross-functional and a highly distributed effort. The overwhelming desire to meet investor ESG expectations is likely to keep  ‘sustainability teams’ far from the innovation effort, improving their proficiency in ESG disclosure and not much beyond.

Most of us got into the job to make a difference. Then we discovered that we were not welcome in those parts of the organisation that held the greatest potential to make that difference. Our marginalisation may have been implicit, explicit or in-between. At some stage, the cognitive dissonance got too much and we opted to leave rather than compress ourselves into mindless cycles of ESG reporting. (Perhaps not entirely mindless, but you know what I mean.) One upside of the present investor awakening is that practitioners are getting desperate calls from parts of the business that have effectively held them at bay since they started in the job. I think this is an opportunity. And don’t take it personally when they insinuate that you should have been doing all along what they are asking you to do now. I know you’ve been telling them exactly this for the better part of a decade…

Sustainability requires a particular kind of agility. When we’re protecting our business from ESG risk, we’re keeping the problem away. When we innovate to scale Profit-Enabled Impact, we embrace the problem. We access novel insights by acknowledging our complicity in creating it. At that point, we connect and are open to change. This is a dangerous place. We walk a fine line between system persistence (‘we always did it like this’) and change (because if we don’t, we die). Whether we are rewiring our neural pathways or catalysing new processes for our organisation, a phase shift takes energy. And we’ve just noticed that our reserves are running low…

Where does the energy come from? This touches on what my long-time mentor and friend Niall Campbell calls ‘a Special Kind of Fitness’. He uses it in a personal context which I’ll write about some day (here’s a clue), but I think the point translates to organisations. The energy we need to make the shift is located within the Intersect itself: that deep complex of socio-environmental relations that determines what matters and that ultimately defines who we are. As practitioners or organisations, accessing this energy requires us to open to a depth of relationship – a new intimacy – with people, place and nature. That’s the Special Kind of Fitness Niall is speaking about. It is terrifying and thrilling beyond measure. And it returns us to where we belong.

In all honesty, I am not sure we’re going to make it. But you know that old story about the person throwing the starfish, one by one, back into the sea…

Banner image cropped from a photo by Gleison Bancolita on Unsplash

To become more resilient, an organisation needs a particular niche at its intersect with society and nature. We determine our niche and the capabilities it requires over time. Capabilities emerge from a mix of skills, assets, technologies, etc, and determine what we are able to do – both now and in potential. This post looks at the capabilities we need at our Intersect in general. The specifics will depend on the particular organisation.

At the highest level, more resilient organisations are able to protect, create and enable value at their intersect with society and nature. They also evolve the ability to detect risks and opportunities earlier and to repurpose existing capabilities to address these quickly and effectively. At a more granular level, the capabilities required to do this depend on the organisation and the nature of their intersect.  Because the risks and opportunities are always shifting, agility is an important general capability.

Companies already protect, create and enable value to a greater or lesser extent and with varying degrees of awareness. They develop these capabilities more actively when they realise that this will increase their options and speed to market of their offerings. Our Sustainability Capability Spectrum – known as ‘The Waves’ – was designed to bring that realisation closer. It helps organisations reflect on their current capabilities at the sustainability intersect and how they might grow them to enhance their competitive ability.

The framework shows how an expanding their range of capability enhances an organisation’s delivery of value. It may face the same risks as its peers, but a more extensive capability base allows it to turn social and environmental risks into opportunities more quickly. Many organisations adopt a linear ‘maturity’ approach to evolving capability at the Intersect. Taking the property sector as an example:

• Most REITs manage carbon emissions and disclose the data to meet ESG raters’ expectations.  They’ve realised that legal compliance provides no immunity to sustainability risk and are now focused actively on managing their ESG risks. The intention is to protect their current value streams.
• Some REITs, such as US-based warehouse giant Prologis, install sufficient renewable energy infrastructure to increase non-GLA income and explore joint offset opportunities with their customers. They have become aware that there is opportunity delivering positive social/environmental impact or ‘creating shared value’. Explorations follow. Viable innovations are scaled and may be linked together to reinforce each other. This contributes to creating value, delivering both financial and tangible social/environmental returns.
• Having developed a solid profit-enabled impact portfolio, organisations have learnt enough to see the value in collaborating with peers – including competitors. These are often large-scale initiatives that enable value by addressing systemic risks to the broader market ecosystem. SA-based Hyprop’s SOKO District digital leasing marketplace, for example, will allow customers to rent space and reusable shopfittings across their portfolio.

In reality, we don’t develop capabilities along a linear path. (Have a look at this piece on pathways to sustainability performance: the Leapfrogs all started by creating value at the Intersect.) In the early days, very few companies thought much about sustainability beyond value protection, so The Waves was meant to show how they were limiting themselves. A lot has changed since then, including our consulting model. By deepening and expanding your spectrum – in all directions at once – you enhance your resilience at the sustainability intersect.

As we become more familiar with our ESG risks and opportunities, we naturally start expanding our range of capabilities. We should also find ourselves asking more difficult questions. Staying with the REITs, for example, we might frame a question when Djo BaNkuna posts in facebook (as quoted by Mark Swilling, in Daily Maverick):

“The sole purpose of a Mall is to permanently extract liquidity in the community ecosystem to the rich suburbs and offshore accounts.” 

If we don’t ask those questions, somebody will ask them for us and this will come in many forms. For many mall owners in South Africa, this took a particularly violent form in August this year, to which the article quoted above refers. And so it will be for each and every one of our sectors as society and nature explore their respective abilities to make themselves heard.

Over a decade, the average client response to the question ‘where are you focusing now?’ has shifted from protecting value to creating value, which means that more companies are seeing opportunity in sustainability issues. This is a good thing and we’re expecting the movement to speed up considerably in the next few years. In The Waves II, I’ll share some thoughts on a hidden resource that few practitioners are aware of, let alone exploring.

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The Great Wave off Kanagawa also known as The Wave, is a woodblock print by the Japanese ukiyo-e artist Hokusai. It was recently parodied in response to Japan’s nuclear wastewater dumping decision (https://www.globaltimes.cn/page/202104/1221726.shtml).

Tesla I I explored some early stage limitations of ESG rating methodologies. In short, they focus almost exclusively on an organisation’s approach to managing ESG risk. They don’t discriminate too much on how they manage these risks and ratings tend to overlook innovation at the Sustainability intersect. I’ve since learnt from my friend Phil Barttram that many raters’ methodologies include a lot more data than are formally requested, scraped by AI from all over the place. I think my key point still stands which is that these methodologies – and their disclosure expectations – are never going to be about resilience.

As practitioners and activists, we need a more practical view. We want to know whether performance and practices are actually leading to resilience – and preferably we want a methodology that doesn’t rely on machines.

I think two factors can help us gauge whether Sustainability practices are building resilience: how wide their range of practice is and how deep they go in doing it.

For range of practice, most organisations undertake practices that:

• protect current value in relation to ESG risks;
• create new value in response to ESG opportunities; and
• enable value by collaborating on systemic challenges.

As companies become more familiar at their intersect, they expand their capabilities to encompass all three. (Explore your company’s sustainability capability spectrum with The Waves.)

For depth of practice, we’d ask how they are actually going about these things, particularly in the face of disturbance.

Think of old-growth forest (or old-growth kelp forests closer to home and pictured above). Old-growth doesn’t mean that the kelp fronds are old. It implies structural complexity, creating microhabitats that increase diversity, abundance and potential resilience. Old-growth ecosystems are not impervious to disturbance – their mature characteristics evolve precisely because of their exposure to disturbance. Consider SAB’s local sourcing ability in relation to emerging black farmers and SMMEs. It may not have delivered on its potential, but localising the supply chain was beset with challenges and inconvenience. Most sustainability innovations encounter these realities as they are scaled. Inherent in that process is learning, network development and new kinds of feedback. According to scientists (and sustainability practitioners), it’s the journey that matters.

We deepen our maturity (and practice) along the way. It’s like this in nature and, from what I have seen, it’s like this in organisations.

If I were to sketch this in a 2×2, it might look something like this. All the companies roughly plotted in the matrix have been formally recognised as global leaders in sustainability or directly related fields.

I’m not proposing this as a model or a tool. In fact, I don’t think it has much value beyond making the (obvious) point that companies take different paths to enhance their resilience.

• The Leading edge have been in the game for a decade or more. Whether coming through as Leapfrogs (e.g. Interface) or Slow ‘n Steadies (e.g. Unilever), they’ve worked a few things out along the way. Often driven by an executive with a breakthrough experience, they expanded their range of practice early on and are now pushing these – along with Sustainability decision-making – deep into their organisations. An early barrier may have been finding partners that shared their perspective, but that is no longer the case.
• Slow ‘n steadies have been at it for a shorter time and are motivated to move forward in every area. The idea of being seen as slow is not acceptable to them. Focused on many areas simultaneously, coordinators are thinly spread. They are still clarifying their practices, recent appointees are still territorial and are not inclined to distribute  decision-making powers too widely. They need to consolidate to move forwards but, having appointed many experts, are tussling over the right focus.
• Leapfrogs tend to get ahead on one big thing and it generally did not emanate from the sustainability team. They found an early wormhole into profit-enabled social/environmental impact and leapfrogged stakeholder pressure to manage ESG risk. They’ve tied up the best partners for their particular innovation areas and road-tested the tech. Most of them weren’t concerned about Sustainability or ESG risk – until investors started rating them last year. Managing ESG risks (a possible gap) requires less energy than bringing innovation to market (which they’ve done already), so they are positioned well. They skirted Sustainability basics though and may need some humility to build a wider base.
• Most companies are Warming up. Struggling to see the wood for the trees, they’re still trying to make sense of their intersect with society and nature. The path seems arduous and they are highly vulnerable to Sustainability sales agents along the way.

Is your organisation progressing on this matrix? What other possible paths might we map out along the way?

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Banner photo, cropped from Kieran Wood at Unsplash, shows the kelp forest as habitat for sea otters amongst many other species.

The rise of the raters has boosted interest in sustainability performance. The sustainability field is at an early stage of formation – barely three decades old.  The fundamentals are coming together slowly. The ESG ratings game is at an even earlier stage, having shifted into high gear in the last couple of years. Mutual learning is advisable.

As raters make sense of the Zone, confusion within their ranks is understandable. What Sikochi and Serafeim kindly call the ‘muddiness factor’ also gives rise to some funny situations. One has been dubbed the ‘Tesla Conundrum’: MSCI gave Tesla a high ESG score based on their contribution to transformative transport solutions while FTSE Russell scored them poorly based on governance. (Tesla narrowly made it onto the S&P500 ESG Index in May 2021, but tensions clearly remain.) More worrying is Sikochi and Serafeim’s finding that more ESG disclosure seems to be increasing the level of disagreement between rating agencies on performance. That could be funny but, with trillions of global investment dollars being channelled by these methodologies, it’s not.

Happily, with a $30 trillion sustainable investment market, raters have ample motivation and resources – financial, human and digital – to advance their methodologies. Expect change to be a constant. Unless they find a way through the muddiness, ESG ratings risk becoming a bad signal in what US-based think tank RethinkX calls the decade of disruption. This is one reason that proprietary methodologies – and divergent scores – is likely to give way to increased regulation, resulting in what my friend Phil Barttram calls a ‘quick and nasty fallout’ in the ratings market.

In the meantime, sustainability practitioners have been exploring links between sustainability, business performance and prospects for quite some time. Carol Adams and Subhash Abhayawansa make this point in their blog on ‘harmonisation’ of sustainability reporting. A quick glance across the field shows sustainability frameworks aplenty, but less convergence on what is meant by maturity and performance.

Let’s imagine an example.

• Five years ago, a financial services institution was convinced that climate change was not material to its business because it had a low carbon footprint.
• Two years later, it decided that climate change was material to its investments in coal-fired power stations. Climate change made it onto the risk register.
• When their institutional investors started screening and tilting their portfolios for climate risk late last year, climate change shot into the top five risks impacting the company’s access to capital and cost of debt.

Its operations had not changed; the climate had not changed that much either. Perspectives had changed. An organisation’s ability to track and respond to a multitude of diverse signals determines its potential – practices, performance and prospects – at their intersect with ESG issues. Currently, ESG raters measure only a small fraction of this potential.

Let’s continue with our imaginary example.

• The bank responds to its awakening by investing more effort into identifying its ESG risks. It reviews its portfolios, decreasing its exposure to carbon. It terminates paper statements, greens it buildings, uploads policies on data privacy and even tries to screen its suppliers for ESG risk. It is developing the ability to protect value at its intersect with society and environment (‘the Zone’). ESG risk goes down; ESG ratings go up.
• As the bank becomes more familiar with this intersect, it realises that its emerging market drive is part of ESG too! When reviewing the carbon exposure of its investment portfolio, the team discovers new opportunities in financing green infrastructure. This informs an adjacent innovation opportunity, leading to transition loans for small businesses seeking to enhance their ESG credentials… and the bank develops its second fundamental capability at the ESG edge: value creation. Measurable financial value and positive ESG impact go up; ESG ratings increase too…

That is, assuming the bank’s profit-led ESG initiatives align with the raters’ weighting of social impact drivers. If you’re Discovery Bank, and your ESG innovation lies in increasing financial health through behaviour change, your ratings may well stay put. Oops. ESG risks may be fairly standard across a sector; but ESG opportunities are infinite in the face of human ingenuity.

ESG ratings are benchmarks and are based on standardisation. Hence the Tesla conundrum. Investors want to invest in innovators like Tesla and Discovery, but these potential ESG disruptors may slip through the raters’ net. ESG ratings are almost entirely focused on whether companies protect value – not on their ability to create or enable value at their ESG intersect.

Unless they find a digital way around this, companies should expect more active engagement from rating agencies in the future.

Banner pic cropped from a photo by Afif Kusuma on Unsplash

I am tentatively naming the Intersect. It’s jargon, but better than repeating “a dynamic set of environmental and social impacts and dependencies, risks and opportunities”. This Intersect is a conceptual – and physical – space where your organisation encounters the bigger systems of society and the environment and vice versa. To survive, your organisation must connect to financial systems, knowledge systems, human systems, etc. But sustainability practitioners focus on the connection to social and natural systems – society and nature – because that is our field of play. They also happen to be the fundamental systems underpinning our survival, and are often the ones organisations think about last. In several hundred years of commerce as we know it, they’ve only just made it onto the business agenda.

Issues abound on this littoral zone amongst the flotsam and jetsam. Some evolve or connect to form material risks and opportunities that require a response, immediate or otherwise. Working at the Intersect recalls a time when our ability to make sense of what lay beyond the tribal village meant the difference between life and death. The Intersect challenges us. It is where we honed our cognitive biases. Millennia on, it is where those same cognitive biases return to mess with our ability to make sense of it.

Taking the diagram as a simplistic starting point, we try to recall that the Intersect has always been:

• Every-which-way: Trends in society and nature impact your organisation; your organisation impacts society and nature. And much about and in-between.
• Dynamic: Issues can become material overnight; a risk today could present an opportunity for positive impact tomorrow. And vice versa.
• Complex: Issues tend to be entangled and unpredictable.

In the old days (I’m being deliberately vague), we took ourselves physically into the Intersect to get to know it. Nowadays, ‘materiality processes’ inform corporate disclosure, reducing the Intersect to a list of topics and trends. Then a few organisational minds set about determining which are more important and why. In fact, they usually don’t think about the second part too much. The first question is overwhelming enough, particularly if we start to wonder who actually made the list in the first place.

It’s not difficult to see why many organisations consider their materiality process to be an in-joke, and are unperturbed as the output – usually a list of 10 ‘material topics’ – floats off, unanchored in any real context, ensuring the requisite box gets ticked. The box that requires them to do a materiality analysis. This is actually happening out there and consulting companies are making even sillier amounts of money running these processes. I’ll box up my cynic for now, trusting that yours will emerge when you find yourself voting up topics onto a 2×2 materiality matrix and paying hardearned cash for the pleasure.

Through a multitude of interactions, your organisation is walking its Intersect already, every minute of every day. We just don’t track the intel. In the absence of using digital tech to do this (which I think is a good idea in principle and my starting place would be SenseMaker), you can hit the 80/20 Pareto point in a good conversation with decision-makers that starts with the business model. By doing this every year, we become aware of our Intersect’s ebbs, flows and eddies as decision-makers grapple to make sense of how the changing context impacts what matters. It’s not the ‘truth’ and it does not produce a list, but it develops an awareness and may help us find better ways to stay in touch.

I think:

1. What matters at the Intersect depends on who’s asking
2. Decision-makers’ intuition about what matters will improve through repeated conversation
3. It takes a village to actually track the Intersect.

Ever since recovering from a memorable evening with a mining client at a local shebeen, I try to schedule at least one non-directed, embodied encounter within the Intersect of the company I am working with. When last did you walk aimlessly in your organisation’s Intersect, conversing with whomever or whatever you encountered? Do you remember? Zoom has made my job more comfortable, but it has serious limitations.

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Banner image cropped from a photo by Dave Hoefler on Unsplash

Sustainability has gotten interesting. Hanks and I had taken to wondering whether it would happen in our lifetimes. It has. Not the whole shebang, but undoubtedly an inflection point. Stuff is happening that previously could not, at a remarkable pace. During a recent lockdown, I reflected on how my work has changed over the past year. One outcome of this reflection is Fieldnotes – our new blogspot aimed at sharing ideas, opinions and learnings.

I’m pretty clear that we’re not going ‘back’ to normal. Here are my five tips for navigating the new normal:

1. Embrace context. Sustainability is mainstream. Almost everyone offers purpose-led, sustainable something. Diversity counts. We have the loud (investors and ESG rating agencies), the smooth (branding and communications agencies) and the deep (single-issue specialists). All are valid, in a given context. Admittedly, some of these contexts are pretty narrow. To help Execs navigate this crowded space, sustainability practitioners should qualify their answers with context. When someone asks: “Are investors interested in our carbon footprint?”, the answer is “It depends”. Then explain under what circumstances they might be interested (eg they’ve just become aware of the TCFD). Indicate what aspect of the footprint they might be interested in (eg your operational footprint if you are a big emitter or the footprint of your investment portfolio if you’re in financial services). Consider whether they’re likely to be interested in the actual footprint or what the footprint might impact (eg your ability to access capital going forward). The ability to put ESG effectively into context differentiates practitioners from the rest.
2. Clarify your turf: I’ve been trying to de-jargonise for the past five years. This year I coined a jargon word. The ESG intersect – ‘the intersect’ for short – is your organisation’s interface with ESG challenges. It’s the sustainability practitioner’s territory. People in our organisations see the intersect in different ways. Some see it as ‘somewhere out there’, managed by a sustainability type, preferably with minimal impact on operational reality.  most practitioners experience the intersect as omnipresent, dynamic and complex. These perspectives are underpinned by worldviews. They have their uses (refer to tip number 1). And people don’t change their worldviews easily. Understanding this helps practitioners be more realistic about their role which is useful because we tend to be a passionate and driven bunch. I was much pleased when some of my clients started referring to ‘the intersect’. I’ll post something on it next week.
3. Get complexity-fit: Those I’ve engaged recently know I veer towards talking about complexity at the least opportunity. I use the term in a technical sense. (Dave Snowden’s Children’s party story is my recommended starting point.) I discovered Snowden’s work a year ago and the Cynefin® Framework and various Cognitive Edge methods have brought sustainability alive for me again. In truth, I ditched most of my IP and went back to the drawing board. Sustainability practitioners tend to be good at systems thinking: turning complex inputs into simple outputs. (Think 2×2 materiality matrices in integrated reports.) The problem with simple outputs is that they’re often too simplistic to inform better decisions at our intersect. I’d all but given up on reconciling consulting with my insights from two decades of indigenous and wilderness practice, but complexity is the bridge. (Obvious in hindsight, as connections always are.) So discovering Snowden’s work has been huge; I am very grateful so expect me to blather on about how his thinking informs my work for the foreseeable future. I know complexity is not for everyone, but the ESG intersect is complex and we humans have an innate – though forgotten – capability in this respect. If we don’t take these two points seriously, we’re really going to struggle with where we are heading.
4. Opt for agile engagements: Incite is  a word-of-mouth company, almost exclusively. In 2019, we submitted a rare tender for a Shared Value strategy in the ICT sector. The tender request listed the tasks; we gave a fee estimate; the contract was structured per deliverable. It was not a good experience all round. Every organisation is unique. What an organisation needs to inform better decisions at their ESG intersect – and the most effective way to operate there – is unique too. Whether in sustainability strategy, innovation or disclosure, my best results have come from flexible thinking partnerships. Having learnt the hard way, I now prefer engaging with a small internal team on whatever is required, wherever it leads, as long as it’s in the right direction. If it’s needed, I will workshop the TOR with the internal team.
5. Share and learn. We’re aiming Fieldnotes at practitioners, internal and external: people grappling honestly with what sustainability seeks and requires. Who want organisations to be part of the solution, not just less of a problem. Who are a bit cynical – because I suspect we’re either that or potentially naïve. Who see their work as an expression of their being in the world. (Be warned, my posts will wander from personal to organisational, from spiritual to material, and back again.) If you are a practitioner – and even if you’re not – welcome to Fieldnotes. Please engage and share your views.

Banner image cropped from a photo by Museums Victoria on Unsplash