Welcome to Just Two Things, which I try to publish daily, five days a week. Some links may also appear on my blog from time to time. Links to the main articles are in cross-heads as well as the story.
#1: Building resilient companies
The business case for resilient companies is strong. They suffer less from the impact of shocks, and recover more quickly, and these characteristics translate into financial performance. That all sounds obvious, but since business cultures don’t always believe the obvious, BCG Henderson Institute has researched it: “Our quantitative study of nearly 1,800 [US] companies over 25 years shows that resilience in unfavorable periods accounts for nearly 30% of long-term outperformance.”
There are several reasons for this. Crisis periods have a disproportionate impact on long run ‘outperformance’, and the deeper the crisis, the more value resilience has. Much of that impact comes from managing the initial shock, but resilient businesses are also likely yo recover faster and to a higher level. The result is that more resilient businesses are more successful over the long-term.
Resilience can be learned, fortunately, although it also involves a cultural mindset—in particular a move away from “efficiency” metrics and financialised ways of running businesses.
It’s a long article, and there’s a useful checklist of what resilient businesses do differently. You can read that for yourselves, since the section on shifting mindsets is more interesting. It reads like a set of recommendations on being (a) future-facing, (b) better at learning, and (c) thinking soft as well as hard:
Have a biological mindset. As uncertainties and interconnections increase, businesses and business environments function more like complex adaptive systems and less like machines that can be optimized…
Think long-term. … Long-run performance is disproportionately determined by performance in crisis periods. Therefore, it is necessary to think ahead…
Think in systems and emphasize collaboration. A chain is only as strong as its weakest link….
Redefine “performance.” Businesses tend to be very goal-oriented…. Aspire to measure and manage forward-looking, long-term metrics like resilience, vitality, and adaptability.
Educate your managers. … your managers have likely been weaned on efficiency thinking rather than resilience thinking. It is important to discuss what you mean by resilience, how it works, and how you plan to achieve it.
Go beyond the numbers. … restricting measures to the easily quantifiable is not enough to create a generally resilient company. You need to embrace weak signals, deal with contingencies, change plans in light of new information…
Be optimistic. Resilience… is also about outflanking your competition by learning faster from changing circumstances and shaping them to your advantage. “Opportunity” should figure in your thinking as much as “risk.”
The outcome of all of this is four types of advantage:
Anticipation advantage: the ability to recognize threats and prepare for them…
Cushioning advantage: the ability to withstand the initial shock…
Adaptation advantage: the ability to quickly identify the actions needed to restore operations and implement them swiftly…
Shaping advantage: the ability to shape the dynamics of the industry in the postshock environment.
#2: Rescuing nature
The biodiversity crisis—or more bluntly, the Sixth Great Extinction—has become a bit of a theme on Just Two Things. The New Scientist has just published a piece (which seems to be outside of its paywall) on what to do to start repairing some of the damage. It’s an urgent task.
The numbers are stark, whichever ones you choose. More than 70 per cent of ice-free land is now under human control and increasingly degraded. The mass of human-made infrastructure exceeds all biomass. Humans and domesticated animals make up more than 90 per cent of the mammalian mass on the planet. Our actions threaten about a million species – 1 in 8 – with extinction (see “Biodiversity: A status report“).
All that has happened in a blink of an eye, geologically speaking. “If you compare Earth’s history to a calendar year, we have used one-third of its natural resources in the last 0.2 seconds,” [UN Secretary-General Antonio] Guterres said in Paris.
The good news—if it can be called ‘good’—is that although we don’t have much time, the situation isn’t yet catastrophic. There are things that can be done, provided we start now. (And how many times does this need to be said?) We need to turn the ‘Great Acceleration’ in our plundering of nature into a ‘Great Restoration.’
The ‘rescue plan for nature’ has a number of elements.
First, we need to expand the amount of ‘protected land’ that is given over to nature. There’s history here, and it’s not encouraging. The Convention of Biological Diversity [CBD] (a UN body) met in Aichi in Japan in 2010 and agreed to protect 17% of land and freshwater and 10% of oceans by 2020. The actual numbers are 15% and 7.5%, but the protected areas are small and often poorly manager. The science says we need to ramp this up to 30% on land and sea: 30 by ‘30 (2030) is the new target.
The second building block is restoration. This can range from passive rewilding—just getting out of the way—to active engineering of entire landscapes with mass planting of trees, reintroduction of species, removal of alien species, and of intrusive infrastructure such as dams. It can be done badly, of course, but we now know a lot about how to do it well:
“We have decades of experience with restoration” [according to Tim Chistoperson of UNEP]. “We know enough. We don’t know everything, and we will find out more as we go along. But we know enough to get started. It’s one of those situations where you can’t let the perfect be the enemy of the good.”
The headline target is to restore 2% of the Earth’s land surface over the next decade—an area about the size of India. The upfront cost is of the order of $1 trillion, but the returns are high. It seems that countries are already committed to this.
Third, we need better biodiversity targets. These are up for agreement at the 2021 meeting of the CBD in China. Again, the upfront costs are high—$700 billion—but the returns are good. “Every dollar spent will accrue between $3 and $75 of economic benefits from ecosystem goods and services,” says Elizabeth Mrema, the CBD’s executive secretary.
The final element here is that biodiversity and climate change are closely linked. We won’t succeed at one without succeeding at the other. And for the first time, the political will seems to be there, with support from financial institutions such as the World Bank.
The New Scientist article doesn’t mention it, but it’s also exactly the right time to be investing in projects with high upfront costs and strong rates of return. Globally, we are awash with money, interest rates are underwater, and capital investment is a perfect vehicle to support economic recovery from the pandemic.
Events: I’m on the panel tomorrow for PTRC’s Fireside Chat on ‘COVI-19: Friend or for decardonising transport?’. It’s on at lunchtime. You can still get tickets here.
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