By Erik Rasmussen, CEO Monday Morning Global Institute & Bjørn K. Haugland, Executive Vice president and Chief Sustainability Officer, DNV
How can we use the pressure from global risks such as extreme weather or water scarcity to create new sustainable business opportunities?
If you have not already asked yourself that question this morning, take five minutes to think about it right now. It might be the best thing you can do for your company.
In today’s strategizing and business developing, we are very good at spotting risks associated with the sustainability challenges facing us. Markets will change, access to critical resources might dry up, and politics and regulation remain unpredictable. This gives many of us daily worries and makes planning for our businesses’ future hard.
Nobel Prize-winning economist Daniel Kahneman is well known for his work showing how we give more attention to avoiding losses than to creating new gains. This is especially true when we are faced with complex risks that we cannot fully comprehend. This is basic human psychology, and we bring it with us to our companies’ office space.
Unfortunately, this also means that we are not nearly as good at seeing the opportunities for creating sustainable businesses as we are at spotting the risks. Our inherent loss-aversion clouds our outlook and carries the risk of stifling our potential to act and invest in a sustainable future. A sad loss for innovation and society at large.
Question is: How do we change this? How do we adopt a lens for the strategic outlook of our companies that enables us to see the opportunities and take the leaps needed to seize on them?
The answer to these questions has been refined for centuries. Tools and mechanisms have been developed to handle the risk of losses and overcome barriers for action. Mutual insurance is a good example. Distributing the individual’s risk over a larger group of people makes it less threatening to invest or engage globally.
Ancient Greek merchants already had this system in place. They dared to face the risks of losing cargo because they knew the other merchants would share their potential loss. The old Greeks dared to take action, because they as a collective entity had a bigger incentive to seek the chance, ship off their goods and reach for the benefit (in this case, a profit). By sharing the risk, they were able to see that the opportunity of trade was more compelling than the alternative of backing down in fear of taking a loss.
Companies and societies today must start doing exactly that. Right now, we dig deep into the risks of water scarcity and global warming. We do, however, talk very little about what societal gains we could achieve from creating, for instance, a no-carbon energy system. Just as the invention of mutual insurance set the Greek merchants free to see the benefits of trade, we need a new tool to help us focus on the benefits of a transition to a more sustainable society, to enable us to act on the sustainability challenges ahead. That work begins now.
From five risks to 15 opportunities
Launching in Johannesburg today — and coming to San Francisco on Thursday — is the new initiative Global Opportunity Network, which begins where traditional risk reports stop. Initiated by DNV GL and Monday Morning Global Institute, the work aims to demonstrate how to turn five global risks into 15 sustainable opportunities for societies and companies across sectors.
Over the next two weeks, academics, innovators, business leaders, public officials and youth organization representatives will convene at workshops in San Francisco, Sao Paulo, London, Johannesburg, Oslo, Abu Dhabi, Mumbai and Shanghai to identify tangible opportunities related to five risks threatening our communities: extreme weather, continued lock-in to fossil fuels, urban breakdown, lack of fresh water and continued rise in non-communicable diseases.
Each risk puts a lot of pressure on our existing way of living. Extreme weather is by far the most costly type of natural disaster, and flooding is a rapidly growing source of both human and economic losses. Non-communicable diseases have become the No. 1 killer in the world, putting healthcare systems on the brink of collapse. And decreasing supplies combined with increasing competition for water reserves soon can result in water resources not meeting demands.
Later this fall, a group of experts will review the identified opportunities and distill them into 15 tangible opportunities. These will then be tested in a global survey with about 5,000 private sector decision makers and influencers to determine how compelling the opportunities are when seen as investment areas.
With the work of the Global Opportunity Network, we aim to enable us all to look at the pressure these global risks impose with a specific set of lenses: The kind that magnifies what new demands, behavior patterns and market disruptions these risks create, and convert this knowledge into sustainable opportunities — for societies and for business. If we succeed, the work will demonstrate that the greatest risk we run is not seeing the opportunities at hand.
The blog was originally posted on www.greenbiz.com August 27