That is a meaningless statement. Neither is there a rule or principle that stops a country adopting another country’s currency as its own legal tender. Ecuador uses the US dollar for its currency and has done for over a decade.

An independent Scotland could easily adopt the British pound as its legal tender if it wanted to, without being part of a banking union. However, its banks could not issue such currency as bank deposits via loans (the current origin of 97% of British pounds), unless it registered those banks HQs and assets within Britain. That’s not that difficult – just over the border, Carlisle might even develop as a financial centre!

Although we might want to keep the UK together, we shouldn’t be misled by politicians, civil servants or reporters who aren’t willing to have a quick google to see what happens around the world.

For Scotland to keep the pound, it would not profit from the issuance and sale of notes and coins. The issuance of physical currency is a tiny issue compared to the economic and social implications of issuance of the majority of money by banks, as debt. If it kept the pound but became independent, Scotland would have no control over monetary policy. If the UK wanted a strict monetary policy but Scotland needed a less strict one to enable more credit to boost economic activity, then Scotland’s economy would suffer an absence of a means to transact. That’s exactly the situation of Greece right now in the Eurozone. It means prolonged recession, austerity and a firesale of state assets. Hmm, but wait. That’s the current situation in Scotland… because the Scotish and British public have very little control over monetary affairs right now, as it is the private banks that decide how much credit is created, at what price and for whom.

So if concerned about monetary policy, as it should be, Scotland could keep the British pound but create a complementary currency to enable internal transactions. After all, why allow the volume of local trade to be determined by monetary policies decided elsewhere? That doesn’t sound like independence to me.

Such complementary currencies are widespread, many thousands of them worldwide, and much more stable than the recent cryptographic currencies like Bitcoin that have become famous in the past year. Some are very local, some are global and involve governments bartering products and even satellite time, some are backed by commodities, like Ven. We learned about dozens of them at a UN conference we helped organise last year, and we teach about them at our Institute: www.iflas.info

Since Bitcoin shot to fame, it is becoming more widely understood that a currency can be founded on an unhackable public database of transactions that is maintained by a network of any computers that download the relevant software. Therefore there are now hundreds of adaptations of the bitcoin code, which create other currencies. It is not surprising then that an entrepreneur announced yesterday that they are creating Scotcoin.

Could Scotcoin be the answer that Scottish independence advocates are seeking? Almost. One of the problems of these cryptographic currencies is that the way they are issued. Early adopters get a huge reward, as do those with the most powerful computers. Therefore, the proposal by Derek from Scotcoin is that an agency will distribute these coins to whoever is registered as resident in Scotland.

Scotcoin, or something similar could work, if a number of things happen:

• The code is changed to adopt Freicoin’s demurrage system so that a small fraction of your coins is paid into a common pot, which can then fund an ongoing basic income payment to every registered user. This avoids hoarding and encourages circulation of the currency
• The code is changed to remove some of the less useful aspects of bitcoin, for instance, requiring a larger amount of mining power to be decisive in changing the protocol (more than 51%), and to speed up the transaction times
• The agency issuing the currency becomes democratically accountable to the people of Scotland, so that people can decide how much the computing processors should receive for maintaining the network, what the demurrage fee should be, what the minimum income should be, and what guidance should be given on new developments in the code
• If issued and governed democratically accountable, then the Scottish government adapts legal tender laws to recognise Scotcoin, so that it would have the same legal standing as Pound Sterling when debts are disputed in court. In addition, the Government would accept tax payments in Scotcoin, or even demand some tax payments in Scotcoin, from companies operating in Scotland. In addition, the Scottish government could begin to pay some portion of state employees with Scotcoin. This would provide some basis for stabilising the demand for Scotcoin, and therefore its market price against other currencies.

Such issues are too important to be left to individual brilliance. If the initiators of Scotcoin don’t like this, no problem, the Scottish government can create their own domain extension, register Scotcoin to it, create their own cryptographic currency with a public mandate in mind, and regulate so that anything called Scotcoin that is not the government-backed system, would simply be counterfeit, and its commercial users prosecuted as such.

I dont think that will be necessary but, yes, in saying this I’ll come clean I’m not an anarchist libertarian who thinks that somehow private enterprise will fix all our problems. Instead, a blend of libertarian sentiment, entrepreneurial drive, and a strong social democratic spirit, could create a more useful monetary system in the long term. Activist entrepreneurs can lead the way, but they need to team up with others who know more about community governance, for instance.

This future governance wouldn’t mean that other private currencies couldn’t emerge.. indeed we are already seeing the emergence of a multi-currency economy around the world. Its just that if one such currency is to play a role as a national currency and be backed by the government, it will need certain characteristics and forms of governance.

If Scots want to go independent and keep the pound, that’s up to them, and they shouldn’t be misled by treasury officials.

The fact this has been opened up is good news, as it reveals how little our politicians and mainstream media seem to understand about monetary issues, so wedded are they to mainstream delusion about the nature of money.

As I heard the Chancellor I was reminded of a quote I included in my new book “Healing Capitalism”:

“To desire freedom is an instinct. To secure it requires intelligence. It must be comprehended and self-asserted. To petition for it is to stultify oneself, for a petitioner is a confessed subject and lacks the spirit of a freeman. To rail and rant against tyranny is to manifest inferiority, for there is no tyranny but ignorance; to be conscious of one’s powers is to lose consciousness of tyranny. Self-government is not a remote aim. It is an intimate and inescapable fact. To govern oneself is a natural imperative, and all tyranny is the miscarriage of self-government. The first requisite of freedom is to accept responsibility for the lack of it.”

That was E.C. Riegel, quite a long time ago, in a book arguing for us to create our own currency systems. As Felix Martin says, Bitcoin ain’t all that new, as the field of currency innovation has been around as long as we have. What is new is the ability for us to create and scale new systems quickly. In bringing attention to monetary issues in the context of the debate about Scottish independence, George Osborne may have inadvertently started a conversation that will bring more people to an awareness that money systems should be what we chose them to be, not means of control and exploitation.

So while I’m at it… Psst, all you austerised local authorities… listen up! You could create your own currencies too, and back them up by your payroll, by local taxes and charges for things like your super expensive car parks. Sound odd? Well these aren’t new ideas, they have been used by around the world already, from Brazil to Kenya. It’s about time we got our DFID civil servants studying what we can learn from the rest of the world, as our Treasury officials sound far too little-Englander to me! Now the Scottish independence debate has taken a monetary turn, and we wake up to our current monetary delusion, perhaps we all might be free.

Thanks, Jem Bendell

Professor of Sustainability Leadership (www.iflas.info)

Some links:

If you want to discuss this, see you over on the Lifeworth-IFLAS Linked In Group: http://www.linkedin.com/groups/Sustainable-Leaders-IFLAS-4778761

The BBC article: http://www.bbc.co.uk/news/uk-scotland-scotland-politics-26166794

See Scotcoin project: www.scotcoin.org

My book where I discuss all these things: http://jembendell.wordpress.com/2014/01/31/healing-capitalism/

If you dont know about Bitcoin: http://jembendell.wordpress.com/2014/01/29/davos-conversations-on-bitcoin/

For my views on the limitations of Bitcoin: http://jembendell.wordpress.com/2014/01/06/crypto-at-the-ok-coral/

Just over five years ago I began working on the luxury industry.  I thought, why cant these elite brands not excel in social and environmental performance? I researched, wrote and produced the report Deeper Luxury for WWF-UK, and it triggered a bit of a furore in the fashion press and wider luxury industry (about 8000 sites now link to the report). 5 years on, I’ve helped some luxury companies with their social and environmental impacts. But I havent seen much change. Some large firms like PPR have embraced the agenda, although we wait in anticipation for more results, in terms of positive social and environmental outcomes. In the 5 years, what inspired me the most were the entrepreneurs I met. People who were creating businesses to address social and environmental problems, and targetting the luxury segment as a way to do that. I began to realise something might be in this – that these entrepreneurs might be shaping the future of luxury, and that they might be revealing a new way we can engage in social change. In the new study, I profile sustainable luxury firms Elvis and Kresse, Tesla Motors, Shokay, Source4Style, Rags2Riches, Positive Luxury, Timothy Han and Nue Luxe… It’s called “Elegant Disruption: How luxury and society can shape each-other for good”. It took about a year to write, as it involved a lot of conversations to understand just what the potential of luxury might be to influence social change. Ill be presenting it at conferences in Brisbane and Barcelona in the coming weeks.

Abstract, August 2012:

From http://www.griffith.edu.au/business-government/asia-pacific-centre-for-sustainable-enterprise/publications/working-paper-series/issue-9
This paper outlines the contemporary luxury sector, showing it is global, thriving and influential. It shows how creative destruction is typical in most industry sectors, including luxury, and how disruptive innovation by entrepreneurs is key to that process. It proposes that the current time is potentially disruptive for incumbent luxury brands and groups, due to five key trends that are beginning to re-frame the markets that luxury brands sell to. Sustainable luxury entrepreneurs from USA, UK, Philippines, India, Argentina, China and Hong Kong are profiled and described as  pursuing “elegant disruption”: a well-designed intervention in markets that both uses and affects aspirations in ways that change patterns of consumption, production or exchange, for a positive societal outcome. The paper reviews the response of mainstream luxury brands to the sustainability agenda, proposing some possible reasons why they appear to be encumbered in embracing this agenda fully. Some of the paradoxes in the notion of “sustainable luxury” are described, in order to draw implications for both the luxury industry and people interested in positive social change. The paper draws upon the authors five years of interaction with the luxury industry on sustainability issues, and is therefore written as a “first person inquiry” and draws upon principles of “appreciative inquiry” in documenting the breakthrough approaches of some sustainable luxury entrepreneurs.

In the coming months, Lifeworth, in association with the world’s leading provider of free open source software for community currencies, is co-running workshops at major sustainability events in Sweden and Greece, and lecturing on this topic in Australia. Scroll down to see details on the events nearest to you. A crisis is an opportunity for a new system to emerge, if we make it so!

Sweden

At the Future Perfect festival in Stockholm, world-leaders in sustainable enterprise, science, design, and media will gather at a world-class summer music festival on 23-26 August.

At Future Perfect, we (Lifeworth Consulting) are hosting a panel on monetary reforms and innovations for sustainability, and a workshop for executives who want to start, scale or participate in alternative means of exchange.

Panel: “Currencies of Transition: monetary reforms and innovations for sustainability.”

Chair: Professor Jem Bendell (Lifeworth Consulting, Community Forge and Griffith Business School)
Ben Dyson, director of Positive Money, which campaigns for a systemic solution to monetary crises, by full reserve banking.
Josh Ryan Collins, New Economics Foundation, the Brixton Pound and co-author of “Where does money come from?”
Lynnea Bylund, Board Member, Ormita, the international business barter network.
Matthew Slater, Board Member, Community Forge, a leading provider of open source software for community currencies, and editor of Community Currency magazine.

The panel will address the questions: Is a fair and sustainable economy possible with our debt-driven money system? If not, what needs to change? What is being done already? What can we do to get involved, personally and professionally? How can we make this a movement? What mistakes can we avoid?

Workshop: “How alternative exchange systems work and how to get started”
Trainers: Professor Jem Bendell and Matthew Slater
The trainers work with Community Forge, which provides free open source software for community currencies. This video explains why, what and how Community Forge operates.

To book your tickets to the festival, visit http://www.futureperfect.se

Greece

In Greece right now there is an exciting air of change and thirst for new ideas and innovations. On the 10th October Lifeworth’s Jem Bendell will co-lead a half day seminar with Matthew Slater of CommunityForge.net on creating and participating in alternative exchange systems and community currencies. They will be joined by Greeks who are pioneering these solutions to the current crisis. On the 11th, Matthew Slater will offer a software training for those wanting to implement a local currency.

The seminars are part of a 2 week sustainable business summit to launch the new European Sustainability Academy in Crete. Information on the final days of the summit, including these workshops on alternative exchange systems, is here. Contact the European Sustainability Academy for more information or to book.

Australia

“Currencies for the Sustainability Transition” is a speech that Professor Jem Bendell will give in Brisbane at the Necessary Transition Conference at Griffith Business School, on the 26th-28th September. Contact the centre for more information on tickets.

As a meeting place of leaders in business and government, the WEF seemed the ideal place to share ideas on how to tackle the jobs crisis. Many of the discussions highlighted small things that businesses can do, such as helping promote employability through funding career-relevant education, or investing in internet start-ups that provide new job opportunities. They also discussed how governments could invest more in infrastructure, education and look again at labour mobility. However, all these issues are secondary to the prime role of our banking system in determining levels of potential employment. As money is issued as debt, if the banks won’t lend to businesses in the real economy, particularly small and medium sized businesses who provide the majority of jobs in any society, then as debts are paid back, so the amount of currency in circulation shrinks. The first key function of a currency, any currency, is to help connect assets, including people’s time, with needs. If a currency becomes scarce in an economy, then there is less ability for exchange. That means needs go unmet, and assets go underutilised. It’s called unemployment.

This critical factor was mentioned at the WEF events in passing, for instance when a finance minister from a North African nation called for more regulations on the percentage of bank lending that must go to small and medium sized enterprises. However, I did not hear discussion of how governments around the world have previously addressed this problem, for instance in East Asia, where 5 year plans often included controls on bank lending, to guide lending to the real economy and job creation, rather than lending for consumer debt and speculative activities. Indeed, I heard from a senior official in Thailand’s planning ministry that credit controls had been dropped from the new 5 year plan. This indicates that the mainstream discourse on the job crisis needs to shift, and business leaders from the real economy, could play a role in that, given that job creation is a win-win for business and society.

For business leaders to play a role in addressing the challenge, the first step is to gain insight into the most significant levers of change, and escape untenable myths about the key causes of unemployment. Five myths I heard from delegates in Davos, Bangkok and Istanbul about the main causes of the jobs crisis, that business leaders need to escape from are:

Myth 1: “Unemployment is due to falling demand.”

Are people’s needs really falling? Or just the amount of money in circulation to employ people/assets to meet those needs? Clearly, given the levels of human need in the world today, its the latter.

Myth 2: “Unemployment is due to technology displacing human labour.”

Could we not design systems of ownership and revenue distribution so that the income from technology frees us to work creatively and caringly for each other? How can we govern technology to release us to a world of service, not a life of redundancy?

Myth 3: “Unemployment is due to the cost of hiring and firing.”

Why then do some countries with high wages and labour standards, like Scandinavia, have less % unemployment? Where would competition between nations to lower costs of hiring and firing lead us? What will competition between nations for the same number of jobs worldwide lead to the total global level of unemployed? Clearly the loosening of employment law is not a systemic solution.

Myth 4: “Unemployment is due to a lack of skills and appetite for the new types of work.”

The world has more skilled labour than ever before, and more labour mobility than ever before, and many people with Masters degrees can’t get a job. The internet means that people can access knowledge more easily than ever before. Education is important, and a lack of education may be a problem for specific groups, but is not a critical factor in mass unemployment at present.

Myth 5: “Unemployment is due to the option to claim benefits.”

Why then was the existence of benefits not keeping people out of the workforce before the recession? Why do some countries with the most supportive welfare states, like Scandinavia, have less % unemployment?

These myths arise from a general lack of understanding about the monetary system. Once we understand that the availability of a currency in an economy determines employment levels we must then look at the monetary system. Once we look at the monetary system we must question why governments have chosen to create a system where 97% of our money is created by private banks as debt with interest so that governments cant spend on public needs without taxing us to pay interest to banks. Rather than maintaining the myth that the financial markets are like the tides or the weather, its time to redesign these entirely man-made systems, to enable currencies to be in fair, stable, sufficient and targeted supply, for job creation. To tackle jobs crisis we need to:

1. wind down non-reserve banking and replace private bank credit creation with government issuance of money, according to strict rules enshrined in law, to avoid inflation. In this situation governments could create credit to lend at low rates to banks who would then lend it to businesses.
2. regulate bank lending and leverage to ensure a large share of lending goes into the real economy and not into consumer debt or speculation.
3. create complementary currencies or exchange systems for communities and businesses, some of which could be issued or backed by local governments.

In my video keynote at the Rebuild21 conference in Copenhagen last week I went into some detail on the monetary system and what we need to do about it, as responsible professionals working towards sustainable development. Then at the World Economic Forum in Istanbul, on video, I explained further how we need to work on monetary reform in order to solve the global jobs crisis.

Once these reforms and innovations occur then governments and companies in the real economy will be far better placed to invest in the necessary transition to a low carbon and resource efficient economy. As Ida Auken, the Environment Minister of Denmark explained at the WEF in Istanbul, there will be tens of millions of jobs created in the green economy of enterprises that deliver more efficient use of resources. Government needs to guide businesses in that transition, but if its only tools are bonds, even eurobonds, then that means very limited spending, higher taxes for future generations, and greater resources for global banking to invest in what it decides will deliver the highest returns. If anything is learned from the financial crisis is that the power of global banking is out of hand.

Folks, in the 5 years since the beginning of the credit crunch, it is now clear that not enough politicians or civil servants know what to do, or are willing to take leadership on the root causes of the financial crisis. In this situation, we need more statesmanship from business leaders from the real economy, to help shift the policy debate onto real solutions. In so doing, as business leaders you will be protecting your own businesses from the disruptive effects of recession. There is also a case for institutional investors to engage in this issue as well, as the long term interests of savers are being risked by the current monetary system.

To sum up: how can your company help create more jobs? By getting involved in monetary reform efforts, and alternative exchange systems, including business barter networks, and the fledgling self-issued credit systems that people like my colleagues are working on. It might be easier to parrot the myths I mentioned above, but it wouldn’t be responsible, or effective.

Professor Jem Bendell

Founder, Lifeworth Consulting, Young Global Leader, World Economic Forum.

June 10th, 2012.

These developments in “collaborative consumption” bring a new dimension to the existing forms of alternative exchange systems, such as business barter networks or countertrade agreements, and community currency systems that help connect underused assets with unmet needs. Countertrade accounts for around 20% of world trade, while one national barter network now involves 1 in 5 small or medium sized companies in Switzerland, amounting to over US$1.5 billion a year. The new sphere of peer-to-peer financial-lending has taken off, and predicted to reach US$5 billion next year. It appears to be a time of disruptive innovation through new forms of sharing, exchanging, renting and co-owning.

Some of these activities are important to sustainable development, and, therefore, to the broad field of responsible enterprise (whether we label our work corporate social responsibility, sustainable business, social enterprise, shared value, responsible or impact investment, or some other term). For business executives to contribute to a positive sustainability outcome from these developments requires enhanced understanding of how to explore ways to become involved, including by adapting their own business models.

Which means there is an educational need, for those of us interested in enabling the sustainability transition. Lifeworth Consulting is conducting research on these developments, for presentation in July at the EABIS colloquium at IMD (in Lausanne), and in September at the Necessary Transition conference at GBS (in Brisbane). So, if you are currently employed, and would like to receive the results of this research, please participate in our 5 minute survey, it would really help:

http://www.lifeworth.com/survey-responsible-enterprise-collaborative-consumption

Please, click that link!

Thanks, Jem Bendell

Lifeworth founder and Adjunct Professor @ GBS

As I read leading commentators on business responsibility and sustainability sharing their insights on trends for 2012, I saw a new boldness. People are recognising the need for ambitious goals that address root causes, including economic governance failures. At Lifeworth we have been seeking to contribute to a sustainable economic transformation and published a variety of works on that theme over the past ten years. In that time I’ve seen the more critical analyses initially ignored by leaders in favour of less challenging narratives. Yet this year I think we will see more opportunity for ‘radical’ suggestions for change to be discussed and trialled. In that sense, despite the fears, it’s the year we have been waiting for. But rather than adding to the many predictions, I’ll summarise Lifeworth’s efforts that could be of relevance if you seek to team up to strive for far greater positive change than you might have before.

The first area for transformative action in which we are engaged is policy innovations for scaling responsible enterprise and finance. Rightly or wrongly, government budgets cuts are happening in many countries. The implications for them to regulate businesses for social and environmental objectives are beginning to be felt. How then can we promote and reward better business practice, without increasing the costs to government? Leveraging private standards of social or environmental performance is one option. In work for the UN Conference on Trade and Development (UNCTAD), we looked at public policy innovations to scale the number of firms adhering to voluntary standards like the Forest Stewardship Council. This appeared in the World Investment Report, with the full academic study published elsewhere. The idea that these forms of ‘collaborative economic governance’ are a pragmatic response to the twin challenges of sustainable development and government efficiencies, was fed into the policy discussions leading to Rio+20, happening this June. The need now is to create systems for collecting innovative public policies for scaling responsible business, analysing which work well in what contents, and disseminating this to government officials worldwide. If you can help on this project, do get in touch.

Yet we must go further than coping mechanisms in a world of irresponsible enterprise and governance failures. The second area for transformative action, therefore, is redesigning financial systems for more fair and sustainable outcomes. Although commitments to responsible investment have existed for some years, the translation into investment practice and the realities of corporate leaders has far to go. The limitations of current environmental, social and governance (ESG) practice in empowering investors to act is one of the stumbling blocks which we analysed in 2011, sparking lively debate. Our interest in ESG is because of the potential for progressive investor influence, which is a historically novel situation. In 2012 I hope we see the emergence of a progressive voice from investors on matters of public concern. Aside from investor-business relations, the public voice of the progressive investor has been slow to emerge. The Carbon Disclosure Project has shown that on climate change investors can sound a new tune on public policy. In 2012 and beyond, we could see other forums, particularly the UN-backed Principles for Responsible Investment (UNPRI), providing opportunities for progressive investors to promote policy debates that better include social and environmental priorities. Whether they will be able to counter-balance the more regressive investor resistance to financial re-regulation will be interesting to watch.

In 2012 I’ll continue to participate in fora that discuss the need for transformation of economic systems for sustainable development, including The Finance Innovation Lab in the UK, the World Economic Forum in Davos, Switzerland, and the Griffith University conference on transition, in Australia. As I explained in an interview for Griffith, the key stumbling block to progress on tough issues is our limiting assumptions and oversights about the real causes of our crises. During the next months I’ll be asking world leaders what they think are the key activities to drive massive positive change that weren’t possible before now, and who they need to work with to make that happen. Identifying such pressure points for massive positive change will inform our philanthropy advisory during 2012, and beyond.

One area where I think there is currently a woefully lack of attention, funding and action is in “sustainable currencies”. Current monetary systems are incompatible with the goal of a fair and sustainable economy, and thus we need greater efforts at reform, as well as at developing secure, scalable and community-owned alternative currencies and barter systems. It is, no doubt, a difficult area for many to grasp; as I experienced myself. Yet in 2011 there were strides towards greater understanding by sustainable development professionals, through the work of New Economics foundation (nef), among others. My TEDx talk on the topic reached over 12,000 views in a couple of months. As austerity bites and unemployment persists, new ways of getting people working for each other without putting governments further into debt will inevitably rise up political agendas. In 2012 we will help through collaboration with Community Forge and The Finance Innovation Lab, amongst others, and promote the uptake of ‘sustainable currencies’ as an innovative social development mechanism, through fora such as the Geneva Forum on Social Change.

What does this renewed emphasis on systemic change mean for specific industry sectors? I think the main implication is to be more ambitious in attempting to mainstream change for sustainable development. That is a third area for seeking transformative action. That has been our approach in the work we do in the luxury and mining sectors. With the organisation Fair Jewelry Action we researched and published “Uplifting the Earth: the ethical performance of high jewellery brands.” In this report we mapped out a transformative agenda for responsible jewellery, where the industry can contribute to sustainable development. From this basis, we aided De Beers’ stakeholder consultations, and worked with the UN Institute for Training and Research (UNITAR) on their training for the jewellery industry, which will be rolled out from Antwerp this year. The Spanish version of the report was launched at the world’s first Sustainable Luxury Awards, in Buenos Aires, co-organised with CSSL and the Authentic Luxury Network. The aim of these awards is to encourage sustainable innovation in the luxury sector; this year’s awards are scheduled for November. The insights from our work on transformative corporate responsibility in the luxury sector were refined for the launch of the world’s first MBA module on ‘Sustainable Luxury and Design’, which I teach at IE Business School, in Madrid. Students learn how sustainability is the smartest and most elegant paradigm within which to design anything. At the other end of the value chain, in 2012 we are working with Channel Research and the German development agency Gesellschaft für Internationale Zusammenarbeit (GIZ) to encourage disclosure on the social, environmental and economic impacts and contributions of mining companies in the Congo. There are few more challenging locations for mining to align better with the goals of peace, human rights and development.

A fourth area for transformative action in 2012 is enhancing the way UN agencies and civil society organisations engage companies. There are now many cross-sectoral partnerships, and the relationships they established hold the potential for greater changes. Largescale change goals need to be connected back to practical steps that can deliver benefits in the near term for various partner organisations. That’s the thinking behind a spate of new resources on more transformative partnering that were released in 2011, including reports from the UN Global Compact, and my own book, “Evolving Partnerships: engaging business for greater social change.” During 2011 we applied our approach to developing transformative alliances in our support for the International Labour Organisation’s fight against forced labour. In 2012 we aim to help the development of their Global Business Alliance against Forced Labour.

Despite the shocking persistence of slavery today, and the general dystopian tone we hear from thoughtful people in international fora, or indeed, because of such darkness, we need a bright vision for life on Earth. That is why we are helping the Future Perfect Festival in Sweden in August. It will celebrate the brilliance and fun of sustainable lifestyles, sustainable businesses and sustainable communities. It will shine rays of light on a better way of life, beyond the dark mountains of outmoded and destructive ways of thinking, working and living. Our ability to understand values, and articulate them in professional contexts, is important when working towards a positive vision. My colleague Ian Doyle has therefore been teaching ‘voicing your values’ class at Grenoble Graduate School of Business, and we will be integrating this into various lines of work in 2012. In our forthcoming book, Healing Capitalism, Ian and I will seek to integrate both the personal and systemic levels of analysis, to aid transformative action.

In summary, we hope our 2012 will involve the following arenas of transformative action:
1) Policy innovations for scaling responsible enterprise and finance;
2) Redesigning financial and monetary systems for more fair and sustainable outcomes;
3) Mainstreaming contributions to sustainable development within specific industry sectors (including luxury, mining etc);
4) More ambitious collaborations between UN agencies, civil society organisations and companies;
5) Visions of sustainable ways of living, pathways to achieve them, and values competence to walk that path.

To better develop our work, this year we become a Swiss non-profit association. We will remain a network of independent associates, and will continue to deliver in partnership with other service providers, for a limited number of clients who seek to create meaningful change. If you can help us have an impact in these areas, I’d love to hear from you.

Professor Jem Bendell
Founder and Director, Lifeworth.com and Lifeworth Consulting
Adjunct Professor, Asia Pacific Centre for Sustainable Enterprise, Griffith Business School
Distinguished Visiting Professor, IE Business School

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The winner of the Best Sustainable Luxury Performance in Latin America in the fashion and accessories category was Pachacuti. The British-based company works with indigenous communities in Ecuador to produce fairly traded high-end panama hats. The Paris-based Ainy won the award for beauty company. It works with Latin American producers to sustainably harvest key ingredients. Argentine company Perma Hue won the award in the tourism sector. An eco-resort in Patagonia, Perma Hue seeks to promote the wellbeing of their visitors through re-connecting with nature. In the jewellery sector, a special mention was given to Oro Verde, not as a company, but as a community cooperative, pioneering the production of ethical gold. They work with Afro-Colombian communities to support small-scale alluvial mining operations in the Choco region of Colombia. Oro Verde™ have pioneered an environmentally sustainable, socially responsible form of artisanal mining that seeks to preserve the unique and vital virgin rainforest ecosystems while providing a fair, regular source of income to miners, their families and their communities. Also for work on jewellery, a special mention was made of Ian Doyle, from Lifeworth Consulting, for his research on a new agenda for responsible jewellery, focusing on social development. A spanish version of his report “Uplifting the Earth” was launched at the awards.

Dana Thomas presenting at the awards

The award to Perma Hue was presented by Maria Eugenia Giron, former CEO of Carrera y Carrera, and author of “Inside Luxury”. Award winners received a leaf bowl of Palo Santo wood carved by the Wichi aboriginals of the Argentine North East. The awards were judged by Maria Eugenia Giron (IE Business School), Dana Thomas (best-selling author), Eduardo Escobedo (United Nations, UNCTAD), Summer Rayne Oakes (Source4style),

Awards Judge Maria Eugenia Giron with winners from Perma Hue

The main Argentine newspaper covered the event and the winners. Awards organiser Miguel Angel Gardetti announced that the awards would stay in Argentina for one more year, but extend their reach in nominations and coverage. Further information on the winners, the speakers, the awards, and others working on sustainable luxury, is available at: http://www.authenticluxury.net

Professor Gardetti and Professor Bendell, founders of the awards

Nominations for the 2012 Sustainable Luxury Awards should be sent to www.lujosustentable.org

The Creativity Revolution in responsible business connects directly to the emerging creative economy, where people’s engagement in new communications technology means we move beyond the information/knowledge economy, to one where personal creativity is empowered and expected, so that people become the co-producers of ideas that shape business, culture, politics. This Creativity Revolution in responsible business is featured in this month’s “Journal of Corporate Citizenship”. Despite the rather uncreative sounding title, it’s full of funky ideas. In a special feature on “design thinking”, which we explain below, Professor David Cooperrider says thinking and practice on a firm’s responsibilities is about to change for good. Then, in a column on global responsible business trends that we at Lifeworth research and write each quarter, we explore the creativity revolution in depth.

Some firms like Virgin are beginning to see the potential. As such they are recruiting more people to work “tackle tough social and environmental problems with an entrepreneurial approach” which we have been to help them with. See: http://www.lifeworth.com/node/19286 [deadline June 4th 2010!]. However, a reality check: the creative approach to a businesses role in society is not yet widespread. In my experience most managers, consultants and academics don’t get it and still think social and environmental issues are just a cost, not a creative force. This is reflected in the codified approaches to responsible business, in things like the new ISO 26000, and most ESG (environmental, social and governance) analysis, where innovation does not feature much, if at all.

To help more executives, their advisers and trainers to get with the creative vibe, and understand the barriers to its mainstream adoption, Ian Doyle and I explored social innovation and design thinking in our column for the journal. It also featured in our annual review of 2009. Here follows sections of the column (for a full copy with references download the pdf, and scan to the final section “sustaining innovation”. Or better still, subscribe to the journal and get to read Prof Cooperriders piece as well).

…What is innovation? According to BusinessDictionary.com, innovation is the “process by which an idea or invention is translated into a good or service for which people will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. Innovation involves deliberate application of information, imagination, and initiative in deriving greater or different value from resources, and encompasses all processes by which new ideas are generated and converted into useful products.”1 It is in essence a systematic and systemic approach that directs acts of invention towards a shared purpose, this purpose being of public benefit in the case of social, sustainable or responsible innovation.2

[There are some...] deep-seated impediments to sustainable innovation from within businesses themselves [which] were explored in a Boston Consulting Group (BCG) publication in October 2009 entitled ‘The Business of Sustainability.’ The report detailed the results of a global survey of over 1,500 corporate executives and managers which sought to better understand the business implications of sustainability.3 One of the conclusions of the report was that although 92 % of businesses were trying to address sustainability issues, most companies struggled on execution demonstrating a lack of coherence between the desire to act and the ability to implement bold action. The report detailed that one of the major obstacles was the difficulty in modelling a business case for sustainability due to three major factors:

- forecasting and planning beyond the one-to-five year time horizon typical of most investment frameworks;
- gauging the system-wide effects of sustainability investments and;
- planning amid high uncertainty.

Whilst these three points illustrate the ambiguity that businesses face, they also demonstrate the typical decision making mechanisms that businesses use in determining future direction. Expanding upon the third point in particular, the report stipulated that,

‘Strategic planning, as traditionally practiced [sic], is deductive – companies draw on a series of standard gauges to predict where the market is heading and then design and execute strategies on the basis of those calculations. But sustainability drivers are anything but predictable, potentially requiring companies to adopt entirely new concepts and frameworks.’4

In criticising deductive logic, where theories arrived at through past experience are used to predict what will happen in future, BCG were giving voice to other forms of knowledge in a domain traditionally dominated by economics, as illustrated by a range of strategy management journals. Economics is a discipline that is highly reductionist and determinist, meaning that to provide insight into society, it reduces complex interactions into a few key variables (reductionism), and then seeks correlations between the variables as a means of identifying cause and effect (determinism). As such, economics has its limits in revealing insight into complex realities. Beyond economics, many of the tools used to describe major trends in society that inform the fields in which companies focus their innovation, depend on quantitative data, including analysis of the subjective opinions and experiences of individuals through surveys. The reliance on what can be inscribed and aggregated, not only enables some useful macroscopic views of trends, but also means there is a temporal and physical distance between the analyst and the realities studied. The data shows how things used to be, not how they could be, and does not provide insight into the complexity of people’s lived experiences. It is as if by looking for the ‘helicopter view’ of a situation, one has to travel away from the phenomena to look back at it through a telescope. What is lost from this approach is not only an understanding of complex consumer needs and wants, but also the potential for a conversation with consumers about what they might want, and how their expressed behaviours might not actually be how they would wish to behave if they had other choices. For instance, the reason that people spend two hours in traffic everyday might be an observed preference, as it is their behaviour, but it is not necessarily their desired preference.

A key lesson here is that in order to become better at strategy, businesses need to get closer to consumers, which is further discussed below. But the main focus of BCG was on the restrictive effects of business executives requiring “proof” of a business plan, where what constitutes proof is narrowly defined, before making a decision to invest in innovation. This was also the focus in Fast Company magazine in November 2009. In an interview on innovation in business with Mr. Roger Martin, Dean of the Rotman School of Management at the University of Toronto, he explains that

‘Most companies try to be innovative, but the enemy of innovation is the mandate to “prove it.” You cannot prove a new idea in advance…’5

The alternative he suggests requires ‘design thinking.’ A simple definition of design thinking is any process that applies the methods of industrial designers to problems beyond the scope of how a product should look. [Design is a concept that goes beyond the creation of products and is concerned with exploring the role of design in sustaining, developing, and integrating human ideas into broader ecological and cultural environments.] ‘Design thinking’ is a user-based approach that observes people in order to create practical solutions in product design and for social problems. It focuses on the nature of the problem itself. Put this way, such a methodology means that products are created in sync with consumer needs rather than creating a product and pushing it into the market place. Mr. Martin suggests that design thinking is a conduit between the intuition of new ideas and the more structured approaches of analysis that

‘…enables the organization to balance exploration and exploitation, invention of business and administration of business, originality and mastery.’6

This suggests that by thinking like a designer, organisations may be freed up from the burden of proof so that the best solution can be explored rather than the illusion of what can be proven.

A November 2009 special report in Business Week Online highlighted how design thinking is impacting business.7 The article illustrated how companies such as Proctor and Gamble (P&G), GE Healthcare and Philips Lighting use design thinking to solve their problems. At P&G, the number of design facilitators has grown from 100 to 175 since 2008 in an attempt to embed such methodologies throughout the organisation, and judging by their enormous growth between 2000 and 2008 when revenue doubled from $40 billion to $83 billion, it isn’t surprising that their performance is being heralded as a triumph of design thinking.8 GE Healthcare has also adopted design thinking and according to a 2003 report by the Danish Design Center, increased design activity such as design-related employee training boosted the company’s revenue on average by 40% more than other companies over a five-year period.9

These earnings may convince companies that ‘design thinking’ is central to the future of innovation, but what might it imply for the social and environmental performance of business, including the challenge of scaling innovation as rapidly as described above? There are two areas of potential benefit. First, as ‘design thinking’ challenges dominant views of what constitutes proven knowledge in strategic planning, and allows for more complexity and uncertainty in decision making, so investments in innovation may gain more attention. This is because, as BCG noted,

“Decisions regarding sustainability have to be made against a backdrop of high uncertainty. Myriad factors muddy the waters because their timing and magnitude of impact are unknown. Such factors include government legislation, demands by customers and employees, and geopolitical events.”10

Second, ‘design thinking’ could encourage businesses to respond to the needs of consumers, rather than seeking ways of marketing existing things to them. This is closely connected to developing a functional perspective on what consumers do, and why they do it. With this view, a car is no longer just a car, but a means of fulfilling a range of functions to the consumer, such as mobility, status, and fun. With that perspective and recognition of growing resource constraints, changing values and technologies, designers could explore how to serve those needs in different ways. Thus needs for mobility, status and fun could be provided separately, or more sustainable transport solutions infused with characteristics that meet the non-mobility functions of existing cars. Making bicycles cool, for instance, or providing more ticket classes and benefits in public transportation. The importance of taking a consumer need perspective, or ‘functional approach’, and seeking to meet that within resource constraints, was identified by UN Environment Programme as a key sustainability policy paradigm for governments in 2001 and explored in these pages in 2006.11

The shift in mindset in design thinking is from regarding a product as simply a physical thing to regarding it as part of a set of relationships that fulfil various purposes for different people, and so those relationships are as important as the thing in itself. In marketing, this view is often discussed in terms of focusing more on the experience of the consumer. There are also strong resonances here with systems thinking, which emphasises that everything is a set of relationships.

The use of design thinking in business innovation has the potential for encouraging more sustainable design, but it depends on what criteria the observation of users occurs, the choice of their needs to be explored, and the intention of the company. In the case of P&G, when designing cosmetic products for instance, do their designers question their users about the wider consequences of the products, or the reasons why consumers have particular ‘needs’ and tastes? In light of the Environmental Working Group’s cosmetic safety database which details hundreds of P&G products containing potentially harmful toxic chemicals, perhaps user observation needs to be coupled with user education as to avoid certain environmental and social issues.12 Design may be used to support innovation and the bottom line, but there is also the risk that the broader ecological boundaries are deliberately circumvented to the detriment of others. So despite the enormous potential of design thinking as highlighted by the examples of P&G and GE, until environmental and social issues become part of the purpose of the organisation, new products may not necessarily be more sustainable.

That said, P&G is starting to apply sustainability criteria to some of their products. Called ‘Sustainable Innovation Products’ or SIPs, P&G has a goal to deliver $50 billion in cumulative sales of products with improved environmental impact by 2012. SIPs must have an overall use reduction of 10% in the areas of transportation, energy, water or materials, or have replaced non-renewable materials with renewable ones.13

Design thinking is not a panacea for social and environmental effectiveness of corporations, and should not be understood as a new function within business, but just one way of practising a more connected and holistic way of doing business. A Harvard Business Publishing article in October 2009 suggested that the success of design thinking is as much about embracing different points of view as it is design methodologies.14 Although Mr. Peter Holtz, the author of the article, founded his company which is dedicated to experience design, he suggests that the effectiveness of design thinking is that it embraces many different experiences and disciplines. He affirms that,

‘What we must understand is that in this savagely complex world, we need to bring as broad a diversity of viewpoints and perspectives to bear on whatever challenges we have in front of us. While it’s wise to question the supremacy of “business thinking,” shifting the focus only to “design thinking” will mean you’re missing out on countless possibilities.’

His comments supported an article in Fast Company earlier in the year that commented on the role of Claudia Kotchka, P&G’s first ever VP for design strategy.15 The author, Dev Patnaik, CEO and founder of Jump Associates, a firm that helps companies create new businesses and reinvent existing ones was quick to point out that Ms. Kotchka was an accountant by training and spent most of her professional life in marketing and thus had no design experience when she started the role. He insists that what design thinking ultimately embodies is the

‘…conscious blending of different fields of thought to discover and develop opportunities that were previously unseen by the status quo.’

So whilst Ms. Kotchka immersed herself in design thinking, it was combining it with her other experiences that made her such a powerful example of design. As Mr. Patnaik concluded,

‘To walk away concluding that design thinking is what makes P&G great would be like going to the movies and concluding that Indiana Jones is a great hero because he always wears a hat.’

It should be of no surprise that corporations using design thinking are now employing people from the social sciences such as sociologists, anthropologists, ethnologists and the like because they can open up thinking through entirely different points of view. The key here is the need to transcend organisational silos and the single lenses that come from specialisation in marketing, finance, human resources, strategic planning, operations, and so on. The new popularity of design thinking, like systems thinking, reflects how organisations are trying various ways to overcome silos. Having teams of experts from different specialisations is one way that organisations try to overcome these silos, but they are rarely more than the sum of their parts. Instead, if managers develop a competence for trans-disciplinarity or trans-functionality, they can draw upon the expertise in different specialisations, while rejecting certain knowledge claims from those disciplines that they can spot as the result of unhelpful assumptions or preoccupations. Key to this is understanding a knowledge claim in its full context: to distinguish between what it reveals and what is simply a projection of its method, theory, and assumptions. Two of the best underlying factors in developing trans-functional competence are critical discourse analysis, and the philosophy of science, as they enable people to de-construct the truth claims they hear.

Furthermore, the organisational silos are there for a reason – they have helped incumbent organisations to control their activities, and regulate any potentially disruptive changes. As a means to shore-up success, corporations have created organisational structures to maintain their financial commitments. As many large organisations are either financed by debt or equity, there are requirements to ensure that debt is paid back on a predetermined schedule or that shareholders are paid a return and so it is understandable that companies have ordered their organisations to meet these demands.16 According to Mr Roger Martin, the consequences of such arrangements for organisational functions are many, and of note for CR professionals. One, organisations will only take the risks associated with exploring new ideas when there is a clear potential for a significantly enhanced financial return; investments in new approaches that would deliver similar returns to existing practices are not favoured. Two, due to the outflow of money, there are limited resources which can be dedicated to innovation thus, ironically, working against their own long-term interest. Three, as a result, meeting the budget is the first measure of operational success as opposed to, for example, better environmental performance. And four, because the nature of the work environment demands reliability for financial purposes, work itself is secondary to the business of making and selling, often demoting people to machine-like tasks and blocking creative potential.17 A corollary to the last point is that work then becomes a measure of time. The consequence is that performance is measured according to quantity and time rather than quality and objectives, potentially leaving the problem to be addressed unsolved in the interest of rapid turn-around.18

It is not just a top down process that enforces silos in organisations. Rather, to be effective in addressing challenges in ways that integrate insights from various organisational functions one must be highly intelligent and enthusiastic about the organisation’s purpose. If one is tired at work, or not deeply interested in the goal of the organisation, then learning the ropes of a particular discipline, and being satisfied one is a trained practitioner in that discipline, is a natural option. The same is true of management schools, where academics have the added pressure of the expert expectation, so that choosing to put boundaries around one’s expertise is an easier way of life.

Whilst corporate responsibility (CR) professionals are presenting sustainability as a source of business opportunity, little is said about those dominant structural aspects of business that are implicitly opposed to innovation. In the case of business, the requirement to ‘guarantee’ profitability means that businesses depend on mechanisms and processes that have demonstrated reliability in working toward this goal.19 But in the face of climate change, financial crises and continual uncertainty, this raises the question of whether the organisational mechanisms that support profit making are as much hampering as stimulating innovation on challenges such as climate change. For professionals working in CR examining deep-seated impediments to sustainable innovation is important.

Stakeholder dialogue is an area of corporate responsibility where design thinking could have a direct application. Concerns over the effectiveness of stakeholder dialogues in aligning the interests of business and their stakeholders raise the question of why there is little innovation when there is a veritable abundance of differing viewpoints at the table.20 This would suggest that there are tools necessary from a process point of view to create a shared sense of problem, to explore the best solutions and then channel these ideas through to the implementation phase. In light of the diversity parallel with design thinking, perhaps the missing element in innovation through stakeholder dialogue is design facilitation, an admittedly ambitious project. For whilst the design facilitator may be able to unite the stakeholders present to solve a problem, the trickle down effect might be a little less effective if the organisational structures behind them are naturally resistant to innovation. Consequently, the greatest challenge facing the CR movement may not be providing creative ideas for businesses but helping organisations to break free of paradigms that they’ve established in attempts to sure up profitably and returns for shareholders. If business is to unleash its sustainability creativity, the CR movement will need to not only promote more design thinking, but also transform existing organisational structures that have been designed to resist change. This is where public policy could play a role with a few interventions at the root of the problem, such as obliging corporations to retain a certain percentage of profits to be used for innovation to address a public need.
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Some executives do get some of these ideas already, including some in the fields we specialise in in at Lifeworth Consulting. One of these is the traditionally stuffy luxury sector: they have a margin and mandate to innovate… and some recognise that, and work with us or have joined the Authentic Luxury Network we established (http://www.authenticluxury.net). The other area we work on is the non profit and governmental sectors’ strategies on business and finance. Not known for innovation either, some execs get it too.. including some who I worked with at WWF-UK a few years back to conceive of what has become The Finance Innovation Lab, to structure a dialogue about what a fair and sustainable financial systems might look like and how we might create pathways for people in all professions to play a role in those systems’ realisation (http://www.thefinancelab.org).

So will design thinking save us? Not in itself, but its growing popularity creates a space for more creative energy, more holistic thinking and systemic approaches applied to real action. As such it could save us from being such an ‘age of stupid’.

Cheers, Jem Bendell (sections from the JCC co-written with Lifeworth Consulting’s Ian Doyle).

Ps: Thanks to Ian Doyle and Bernise Ang for pushing me last year to explore design thinking more fully!

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There are a three ways to navigate the site. First, you can select from the main menu. From here you can see an outline of “what” we do, including the services of strategy, creativity, communications, liaison and education:. In addition is takes you to information on the work programmes we have, including Authentic Luxury, Enterprise Trends and Engaging Change. Clicking on “with” will show you who we have been working with. If you want to see the 18 of us who are associated with Lifeworth Consulting, click on “who”. If you want to know the approach we take and the principles underlying our work, click on “how”. If you click on “Insight” you can access our latest “publications”, read our latest “news and views” or even watch us in “videos”.

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The site is driven by wordpress software. It again demonstrates the potential of open source software, after our new responsible enterprise careers portal, which is based on Drupal software. In the digital age, owning code is like owning the rights to using a pen and paper. I think it is in keeping with our transformative approach that we are now part of this open source movement.

Thanks to Sam Baja for working on the site for us, and thank you for visiting.

Dr. Jem Bendell
Founder/Director of Lifeworth and Lifeworth Consulting