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 Zanden and Henzen
Economic growth has catalysed enormous progress in the world,
but we have entered an era of perverse economic growth, at the
expense of social and natural capital. As the world runs further
behind on the Sustainable Development Goals, managing and
mitigating the looming environmental and social crises in an
increasingly volatile, uncertain, complex and ambiguous world
will be one of the biggest challenges, but also one of the biggest
Reinventing
commercial opportunities, of our time. Building on earlier research Capitalism
on systemic change, using the WHAT-HOW-WHY framework,
this Element presents actionable insights for the radical systemic
reinvention of our ‘critical systems’ that satisfy human and societal
needs such as nutrition, mobility, infrastructure and health. We
highlight ten emerging paradigms for future-fit systemic change,

Transforming Our Critical Systems

discuss how stakeholder mindsets can be developed and present
new skills for leaders and a pathway to enable companies to
become drivers of collaborative transformation. This title is also
Transforming Our
available as Open Access on Cambridge Core.
Critical Systems
About the Series Series Editors
This series seeks to feature explorations Arie Y. Lewin
about the crisis of legitimacy facing Duke University
capitalism today, including the Till Talaulicar
increasing income and wealth gap,
the decline of the middle class, threats
to employment due to globalization
University of Erfurt
Geert-Jan
and digitalization, undermined
trust in institutions, discrimination
van der Zanden and
against minorities, global poverty and
pollution. Being grounded in a business
and management perspective, the
Rozanne Henzen
series incorporates contributions from
multiple disciplines on the causes
of the current crisis and potential
solutions to renew capitalism.

This title is also available as Open Access on

Cambridge Core at www.cambridge.org/core

Cover image: Tanawat Thipmontha /

EyeEm / Getty Images ISSN 2634-8950 (online)
ISSN 2634-8942 (print)
 Elements in Reinventing Capitalism
edited by
Arie Y. Lewin
Duke University
Till Talaulicar
University of Erfurt

TRANSFORMING OUR
CRITICAL SYSTEMS

How Can We Achieve the Systemic

Change the World Needs?

Geert-Jan van der Zanden

Sasin School of Management
Rozanne Henzen
Sasin School of Management
 Shaftesbury Road, Cambridge CB2 8EA, United Kingdom
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www.cambridge.org
Information on this title: www.cambridge.org/9781009475655
DOI: 10.1017/9781009410311
© Geert-Jan van der Zanden and Rozanne Henzen 2024
This publication is in copyright. Subject to statutory exception and to the provisions
of relevant collective licensing agreements, with the exception of the Creative
Commons version the link for which is provided below, no reproduction of any part
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ISSN 2634-8950 (online)
ISSN 2634-8942 (print)
Cambridge University Press & Assessment has no responsibility for the persistence
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 Transforming Our Critical Systems

How Can We Achieve the Systemic Change the World Needs?

Elements in Reinventing Capitalism

DOI: 10.1017/9781009410311
First published online: January 2024

Geert-Jan van der Zanden

Sasin School of Management
Rozanne Henzen
Sasin School of Management
Author for correspondence: Geert-Jan van der Zanden, gj.vanderzanden@
sasin.edu

Abstract: Economic growth has catalysed enormous progress in the

world, but we have entered an era of perverse economic growth, at the
expense of social and natural capital. As the world runs further behind
on the Sustainable Development Goals, managing and mitigating the
looming environmental and social crises in an increasingly volatile,
uncertain, complex and ambiguous world will be one of the biggest
challenges, but also one of the biggest commercial opportunities, of
our time. Building on earlier research on systemic change, using the
WHAT-HOW-WHY framework, this Element presents actionable
insights for the radical systemic reinvention of our ‘critical systems’ that
satisfy human and societal needs such as nutrition, mobility,
infrastructure and health. We highlight ten emerging paradigms for
future-fit systemic change, discuss how stakeholder mindsets can be
developed and present new skills for leaders and a pathway to enable
companies to become drivers of collaborative transformation. This title
is also available as Open Access on Cambridge Core.

This Element also has a video abstract:

www.cambridge.org/vanderzanden-henzen
Keywords: transformation, leadership, sustainability, systemic/system
change, mindset, collaboration

© Geert-Jan van der Zanden and Rozanne Henzen 2024

ISBNs: 9781009475655 (HB), 9781009410328 (PB), 9781009410311 (OC)
ISSNs: 2634-8950 (online), 2634-8942 (print)
 Contents

Prologue: The Purpose of This Element 1

Executive Summary 2

1 Reinventing Value Creation 4

2 Where to Intervene? 23

3 Creating the Conditions for Collaborative

Systemic Change 40

Final Thoughts 71

References 73
 Transforming Our Critical Systems 1

Prologue: The Purpose of This Element

Since the beginning of time, humanity has organised itself to satisfy its needs,
from the basic needs of feeding, housing and staying safe and healthy to more
elevated needs of developing and managing communities. As a result, we create
tremendous wealth, live longer, get smarter, suffer less, enjoy richer experiences
and our species has grown exponentially. We are left to wonder, though, is this
the right measure of success?
To a large extent, mankind’s success has come from its ability to harness
nature. In the Netherlands, where we both grew up, a populous country, a third
of which is below sea level, harnessing nature is part of the national psyche. But,
unfortunately, our eagerness to harness nature has turned into a destructive
force, eroding the very thing we are part of and depend on: nature.
Dutch culture is also very pragmatic and inquisitive, which has helped us
question things, open our minds and learn while working and living in different
countries around the world. This is where, for both of us, our curiosity originated
to question and rethink the way mankind organises itself to satisfy its needs.
As societal imbalances and tensions between humanity and nature continue
to escalate, mere incremental adjustments to legacy models are no longer
sufficient. Instead, there is an urgent need for a radical, holistic and systemic
transformation of our current models. Various scholars have acknowledged the
immense challenges involved in deliberately altering complex systems, and we
will delve into these complexities. The primary objective of this Element is to
expand upon existing ideas and establish a connection between theoretical
literature and practical approaches to accomplish actionable insights for sys-
temic change. Moreover, the Element aims to explore the facilitation of neces-
sary shifts in mindsets and cross-sector collaborations, with a specific focus on
the business sector (and business education), whose crucial role in systemic
change processes currently remains relatively under-explored.
In addition, from Geert-Jan: While escaping from the big city bustle, during
reflexive hikes in Taiwan’s mountainous cedar forests and dives in Southeast
Asia’s coral reefs, it became increasingly clear to me that our real measure of
success should be to live in harmony with our natural and human environment,
working with nature, not against it, and making sure we leave no one behind when
we pursue wealth and well-being. This will be the biggest challenge and the
biggest opportunity of our time.
Combining business studies in Europe and the USA and studies in environ-
mental management and policy in Scandinavia with decades in business as
a practitioner and executive adviser in sustainability transition, I am now
honoured to be able to share my insights as a visiting professor at Sasin
2 Reinventing Capitalism

School of Management, in Bangkok, helping to progress a sustainability mind-

set in a region that will be a pivotal hotspot in humanity’s efforts to mitigate and
adapt to the effects of climate change and resource depletion. Following an
article on systemic change in AACSB magazine (Association to Advance
Collegiate Schools of Business), Professor Arie Lewin requested me to share
more on this topic in an Element in the Reinventing Capitalism series of
Cambridge University Press. Given the very challenging trajectory the relation-
ship between man and nature has been on this last century and the urgency for us
to more radically and holistically address many of our complex societal prob-
lems, I am grateful for this opportunity and hope the frameworks and thoughts
expressed in this Element will trigger further constructive thinking and action.
In addition, from Rozanne: I have been working within the fascinating world
of sustainability and circularity for the last decade, first as a student, then as
a researcher and author. It has become apparent that ideas on tackling our
twenty-first-century challenges have been voiced by many, but the action
needed is running behind. Humans are unique in the sense that we have the
power to combine ideas, have thoughts about those ideas, share them with
others, build on them and bring them to life. I want to call on you, our readers,
to change your perspective from consumer to concerned citizen, and shift from
individualistic thinking to we-thinking, to help magnify the power of these
ideas. Not that the responsibility to solve our 21st-century problems lies with
the individual; to me, it should be a combined multi-stakeholder effort, but all
individuals have the ability to take that citizen perspective with them in their
work and daily lives. And now, specifically to my fellow Millennials and Gen
Z readers because we feel the weight of the world pressing down on us: we have
the opportunity to create a new system in which we will not make the same
mistakes our parents’ and grandparents’ generations did. With the help of
creativity, innovation and trust in our capabilities, we can magnify our power
to rethink, redesign and rearrange our future and our now.

Executive Summary
Economic growth has catalysed enormous progress in the world. However,
focus on economic growth alone in many ways has become a destructive
force, promoting short-term wins over long-term prosperity, depleting natural
resources and widening exclusion. At the expense of social and natural capital,
we have entered an increasingly perverse economic growth era. Environmental
and social challenges constitute the most significant risks to businesses and
society today. There is increasing awareness among leaders, consumers and
capital providers that we must radically reinvent how we satisfy human
and societal needs to manage and mitigate these risks. We need to reinvent
 Transforming Our Critical Systems 3

the growth model for the societal and environmental realities of the twenty-first
century, to work with nature, not against it, and create value in the long rather
than the short term, for many, not just a privileged few.
Despite big governmental and corporate commitments towards the Sustainable
Development Goals (SDGs), the world is running behind in the sustainability
transition. To limit global warming to 1.5°C and avoid the chance of catastrophic
impacts, CO2-eq (CO2 equivalent) emissions need to be reduced by 45 per cent
from 2010 levels by 2030. Instead, based on all national commitments made as of
March 2023, CO2-eq emissions are expected to rise by 10 per cent by 2030.
Moreover, as we get further behind in the implementation of these plans, the
urgency and the need increase for radical system-level reinvention instead of
marginal innovation of the ‘critical systems’ that satisfy our basic human needs,
such as nutrition, mobility, infrastructure or health, and the ‘supporting systems’
that enable the critical ones, such as finance, energy, education or governance.
The need to achieve radical impact in a relatively short period is one of the
biggest challenges and biggest commercial opportunities of our time. As
a result, unprecedented governmental and private funding is becoming available
for our systems’ environmentally responsible and socially just reinvention.
Systems are complex because they involve multiple actors and stakeholders
with often diverse objectives and priorities and numerous connected subsys-
tems with governance contexts and dynamics of their own. Systems thinking
gives us a valuable way to understand the relationships between the components
and actors in a system and foresee the intended and the unintended ripple effects
of our interventions in that system.
History has taught us that leverage points for systemic change are often
counter-intuitive. In this Element, we expand upon existing ideas and establish
a connection between theoretical literature and practical approaches to accom-
plish actionable insights for systemic change. We do this by analysing examples
of systemic change efforts in multiple systems and geographies through the lens
of a modification of the Systemic Intervention Framework originally introduced
by Donella Meadows (1999). We categorise these intervention areas as WHY,
HOW or WHAT, and bring forward the following practical insights:

1. WHAT without WHY interventions are likely to deliver suboptimal outcomes.

2. Lack of alignment between subsystems hinders systemic change.
3. Silver-bullet solutions require increased precaution to prevent unintended
consequences.
4. WHY interventions require investment in collaborative processes.
5. Old mindsets are unlikely to produce a new system.
6. Big commitments need reinforcement.
4 Reinventing Capitalism

Change is complex, and systemic change in today’s volatile, uncertain, complex

and ambiguous (VUCA) environment even more so. Practice shows that inter-
ventions dictated by one actor often realise limited or counterproductive impact at
the system level because they lack a system understanding, a shared mindset and
a shared vision across stakeholders. The successful reinvention of systems
therefore requires multi-stakeholder collaboration. In this context, stakeholders
like regulators and policymakers, business, finance providers, technology innov-
ators, empowered citizens, educational institutions and change managers all play
vital roles. They can collectively create the necessary conditions, incentives,
paradigms, values, mindsets and cultures that foster effective multi-stakeholder
collaboration. By working together, these diverse actors can drive more signifi-
cant progress towards the crucial task of reinventing critical systems.
This Element explains why business is ideally positioned to lead the multi-
stakeholder collaboration for the much-needed transformation of our critical
systems. Companies’ relationship with society is evolving from one where
companies see sustainability challenges as a risk to one where sustainability
and systemic transformation are seen as opportunities for new growth.
Businesses can convert into transformational organisations by aligning strategic
visioning with strengthening of organisational capabilities and development of
collaborative networks for impact and new growth.
The paradigm and the mindset out of which a system and its objectives emerge
are the strongest potential intervention points for systemic change but also the
most challenging ones. This Element describes ten emerging paradigms that will
facilitate future-fit systemic change and explores the potential and the dynamics
of changing mindsets between corporate and public actors and citizens. Business
education can play a critical role in anchoring future-fit paradigms and cultivating
the necessary mindset for our future leaders. Leadership skills and tools can be
developed that empower leaders to drive change in themselves, their organisa-
tions and the systems they are part of. We are convinced that by strengthening
skills such as contextual mindfulness, future consciousness, systems range, cross-
collaborative competence, radical impact agility and, most importantly, purpose,
we can develop a generation of more rounded, humanistic leaders that can lead
the transformation to a future of more sustainable and socially just models of
value creation within our planetary boundaries.

1 Reinventing Value Creation

Undoubtedly, economic growth driven by shareholder capitalism has catalysed
enormous progress worldwide. It has allowed us to feed, house, move and
service billions. Nevertheless, the inventor of the modern gross domestic
 Transforming Our Critical Systems 5

product (GDP) concept in 1934, Simon Kuznets himself, warned that a singular
focus on economic growth is too simplistic as it fails to consider the quality and
distribution of growth, or the distinction between the short and the long term:
‘The welfare of a nation can scarcely be inferred from a measurement of
national income’ (Kuznets, 1934, p. 7).
Despite Kuznets’ warning being often quoted in recent years, and proof
stacking up that our current growth model is broken, the addiction to GDP as
the ultimate measure of success seems stubbornly hard to shake in economic,
business and political circles. The no-brain default solution that most govern-
ments and central banks still seem to have for economic slowdown is to boost
consumption, increase public spending and lower the cost of credit, incentivis-
ing us all to buy ‘more stuff we do not need with money we do not have to
impress people we do not know’, and further driving inequality in the process.

1.1 It’s the Economy, Stupid . . . or Is It?

We have entered an era of perverse economic growth. Our current model is
increasingly generating economic growth at the expense of natural and social
capital. A study by Trucost (2013) concluded that the annual externalities, the
cost to natural capital, of our economic activity were $7.3 trillion, roughly
13 per cent of global GDP, with greenhouse gas (GHG) emissions from coal
power generation in East Asia and North America, land use from cattle ranching
in South America and South Asia, and water use in wheat farming in South Asia
topping the list of externalities.
Similarly, Goh, Pfeffer and Zenios (2015) estimated the spending on health
care to combat depression and burnout to be more than $190 billion per year in
the USA alone. Ironically, this expense resulting from the deterioration of social
capital is formally considered a contribution to GDP. Another striking example
is the expense of war. Despite often being at the expense of forms of social
capital like education or health, the $14 trillion spent by the Pentagon since the
start of the Afghan war in 2001 perversely counts towards GDP growth, while
the loss of lives and the destruction of assets are not directly accounted for in the
GDP calculation (Brown University, 2021).
We need to generate economic well-being, but not at the expense of natural,
human and social capital, thus avoiding perverse growth. Anthropogenic cli-
mate change, water and resource shortages, biodiversity loss and social
inequity, with their interrelations and knock-on effects, significantly impact
business and society. In the next ten years, they all pose an enormous threat in
terms of both likelihood and impact. According to the Global Risks Report 2023
by the World Economic Forum (WEF, 2023), eight of the top ten most severe
6 Reinventing Capitalism

Failure to mitigate climate change

Failure of climate change adaptation

Natural disasters and extreme weather events

Biodiversity loss and ecosystem collapse

Top 10
Large-scale involuntary migration
Global Risks
Natural resource crises
by Severity
Over the next 10 Years Erosion of social cohesion and societal polarization

Widespread cybercrime and cyber insecurity

Geoeconomic confrontation

Large-scale environment damage incidents

Risk categories: I Economic I Environment I Geopolitical I Social I Technological

Figure 1 Eight of the biggest global risks in the next ten years are
environmental or social.

global risks over the next ten years are environmental and societal (see
Figure 1): failure to adapt to and mitigate climate change, natural disasters,
biodiversity loss, extreme weather events and ecosystem collapse will directly
influence and be influenced by other significant risks identified in the report,
such as large-scale involuntary migration, natural resource crises, erosion of
social cohesion, geo-economic confrontation and large-scale environmental
damage events.
Our obsession with economic GDP has made us collectively lose sight of the
fact that, according to the WEF (2020), $44 trillion of economic value generation –
more than half of the global GDP – relies moderately or highly on nature and its
services, and is therefore exposed to losses of nature. But we extract more natural
resources, return more GHG to the air and generate more waste than the earth’s
natural cycles can compensate for.
We will soon see our GDP growth negatively affected by our failure to act
effectively to mitigate climate change. A 2021 analysis of climate and transition
risks by the world’s largest insurance company, SwissRe, concludes that under
the current trajectory, the impacts of climate change are likely to reduce global
GDP by 11–14 per cent by 2050 compared to a situation with no climate change
(SwissRe, 2021). By comparison, during Covid-19 lockdowns in 2020, global
GDP dropped 3.3 per cent. Moreover, because social and environmental issues
are so closely related, this also contributes to social injustice and a decline in
social capital. Agriculture and natural resources are essential for the survival of
three out of every four individuals who live in poverty. Owing to their increased
exposure to food and livelihood insecurity, conflict and the health implications
 Transforming Our Critical Systems 7

of extreme weather events, they are more likely to be disproportionately

impacted by climate change.
In an exploratory scenario analysis of the vulnerability and readiness of 135
countries in relation to climate change over the next 30 years, S&P Global
Ratings (2022) finds that because lower- and lower-middle-income countries
are more exposed to the effects of climate change and have less capacity to
adapt, owing to weaker institutions and lower financial capacity, these countries
are likely to see 3.6 times more losses on average owing to climate change
incidents than higher-middle- and higher-income countries. Swiss Re’s (2021)
stress tests show that climate change will impact forty-eight countries, repre-
senting 90 per cent of the world economy. The disruption and the investment
required for economies and societies to adapt are highest in Asia: China is at risk
of losing 24 per cent of its GDP without any mitigation actions, while Europe is
heading to a loss of 11 per cent and the USA stands to lose close to 10 per cent.
Southeast Asia could see GDP reduced by as much as 29 per cent.
Most of our economic growth models are based on material throughput,
population growth and the myopic belief that more people producing and con-
suming more stuff will grow our GDP and, thus, our well-being. Despite history
being full of examples of civilisations falling because of living in imbalance with
their natural environment (such as the Sumerian, the Mayan and the Angkor
civilisations), these last decades we are again learning the hard way that our
legacy growth model, too focussed on economic wealth creation alone, is bring-
ing unintended and undesired consequences. Despite having created tremendous
economic value, it has become, in many ways, a destructive force, causing
climate change and depleting natural capital, promoting short-term wins over
long-term prosperity and widening social exclusion. Environmental and social
costs, inherent but previously hidden in the old growth model, make it glaringly
evident that our old model is unsuitable for the future.
Humanity’s biomass accounts for only one ten-thousandth of the life on
Earth, measured by the dry weight of carbon that makes up the structure of all
living things (Bar-On et al., 2018). However, humans have an enormously
outsized influence on all other living things and, because of that, our current
pathway looks as follows:

• The human population has grown from 2 billion in the 1920s to more than
8 billion today. Moreover, this trend will only continue, reaching 10 billion
people globally in the mid-2050s. Therefore, the biggest challenge of our
generation is to satisfy the needs of 8 billion to 10 billion people in ways that
do not surpass the environmental limits or erode the social foundations of
our societies.
8 Reinventing Capitalism

• Climate change is one of the biggest crises the world is currently experien-
cing. It is accelerating and bringing the world close to irreversible change: out
of fifteen climate tipping points identified by the Intergovernmental Panel on
Climate Change (IPCC), nine are already at the point of no return, such as the
warming of tundras in the northern hemisphere, which is causing a thawing of
permafrost, releasing vast amounts of the potent GHG methane into the
atmosphere and triggering feedback loops that bring the climate, and us,
dangerously close to irreversible tipping points (IPCC, 2020).
• Our global annual burning of fossil fuels is the equivalent of the growth of all
plants worldwide for 400 years. Meanwhile, relentless deforestation – the
equivalent of one football field every 2 seconds, only half of which is
replanted (FAO, 2020) – primarily for agricultural conversion, has turned
the Amazon from a carbon sink into a net emitter of GHG.
• We lost two-thirds of the world’s animal population in the past fifty years, partly
driven by deforestation and by a tenfold increase in the number of dead zones in
our oceans owing to agricultural run-off of fertilisers and pesticides (IPBES,
2019). This loss directly affects the robustness of food chains and nature’s
capacity to defend itself and us against pests and the effects of climate change.
• More extreme weather events caused by climate change will affect food
production and livelihoods. The World Bank (2021) predicts 216 million
additional climate change migrants by 2050 in Africa, Asia, South America
and Eastern Europe alone.
• By 2030, a 40 per cent disparity between water availability and demand is
anticipated, and as many as 700 million people could be displaced by water
scarcity (HLPW, 2018). Water shortages are predicted to affect one in four
people worldwide by 2050, not just in geographies like the Middle East,
North Africa and India but also in sections of the USA, Spain and even major
cities like London. In addition, water scarcity threatens to push up food costs,
which could cause instability and conflict.
• The global economy extracted and used more resources in the past six years
than in the entire twentieth century, and levels of waste in our environment
have never been higher (CGRI, 2023).
• Only 9 per cent of the 300 million tons of plastics we produce yearly –
roughly the equivalent of the weight of the entire human world population
combined – is recycled. Most plastics end up in landfill, and an estimated
8 million tons end up in our oceans (WEF et al., 2016). By 2050, more plastic
than fish will be in the ocean if the current overfishing and plastic production
rate continues.
• Inequality is on the rise. Of all the new wealth in the world, the wealthiest
1 per cent of the world’s population on a per-person basis captures more than
 Transforming Our Critical Systems 9

110 times the wealth captured by the poorest 50 per cent, who together own
just 2 per cent of the world’s economic wealth, according to World Inequality
Report 2022 (World Inequality Lab, 2022).
• Covid-19 had a disproportionate impact on poor people. In 2021 alone,
97 million people were pushed back into extreme poverty, bringing the
total number of people worldwide living on less than $1.90 per day by the
end of 2022 to an estimated 685 million people, according to the World Bank
(2022). Moreover, this number might rise further as the knock-on effects of
the pandemic (inflation, economic downturn) take shape.

Nature has a remarkable potential to sustain us, whether through the recycling
of our water, the digestion of our waste, the production of our food or the
removal of CO2 from the air to create the oxygen we breathe. However, as our
species expands, so does our impact. As a result, as man’s dominion over nature
increases, the capacity of nature to supply its services and to compensate for our
impact decreases, exacerbating the effects of our perverse growth and acceler-
ating the ‘degeneration’ of natural capital. Furthermore, as our natural capital
erodes, low-income populations are most heavily affected, widening the gap
between rich and poor and eroding the social fabric.
Reason enough to stop and think. Is this the type of economic growth we
want? Instead of accelerating our demise, we need to mobilise our innovation
and collaboration capacity, not only to reinvent growth to fit within the planet’s
ecological boundaries and not deteriorate our social foundations but also to
regenerate nature’s capacity to help us solve our problems and to bolster our
social capital through higher levels of inclusion.

1.2 Systemic Challenges Require Systemic Solutions

Most sustainability challenges, such as climate change, waste and resource chal-
lenges, natural capital loss, poverty and inequality, are systemic challenges: they
involve multiple actors, stakeholders and numerous connected subsystems –
social, institutional, cultural, political, economic, technical and ecological –
often with governance contexts and dynamics of their own. As a result, these
problems are complex, with multiple causal relationships, feedback loops and
often unforeseen consequences.
Focussing on individual causal relationships and intervening in just one
aspect of these complex systems will almost never solve the problem; rather,
it will relocate the problem or cause other unforeseen consequences beyond the
causal relationship of focus. Systemic challenges require systemic solutions.
This requires a deep understanding of the complex systems surrounding the
challenges. Thinking in terms of systems helps us understand the relationships
10 Reinventing Capitalism

between the components and the actors in a system and foresee the intended and
the unintended ripple effects of one’s interventions in that system, thus enabling
us to envision the most responsible approaches to solving complex societal
challenges.
Section 2 will explore system dynamics in more detail, but for a good
understanding of our analysis and recommendations, we briefly clarify what
we mean by systems, systems thinking and systemic change. Systems thinking
expert Donella Meadows defined a system as a set of things – people, cells,
molecules or others – interconnected so that they produce their pattern of
behaviour over time (Meadows, 1999). Systems exist in the physical world.
These can be natural ecosystems, such as the marine environment, and our
social systems, such as the food or health-care systems. They can also be
socially created systems such as belief systems. When we talk about systems
in this Element, we generally refer to the system of actors, conditions and the
dynamics between them, and possibly adjacent systems, that have formed
around satisfying a societal need, such as societies’ need for nutrition, mobil-
ity, shelter, health, safety and comfort. These systems are enabled by support-
ing systems such as finance, energy, education or governance. All these
systems involve various smaller parts and organisations at multiple levels
that form an intricate whole whose behaviour is influenced by the system’s
structure, the interaction of its parts and the conditions affecting the system
and its parts.
Pioneered by biologists but divided over several disciplines, the main char-
acteristics of systemic thinking or ‘thinking in systems’ arose in Europe during
the 1920s (Capra & Luisi, 2014). These ideas, especially Bertalanffy’s concepts
of general systems theory and open systems, helped to give birth to a new way
of thinking: thinking in terms of patterns, relationships, connectedness and
context. The ability to see the interdependence between multiple events hap-
pening in different parts of the world, instead of seeing them as isolated events,
allows for a richer understanding based on the incorporation of multiple and
different (sometimes even conflicting) views. The understanding that ‘proper-
ties of the parts are not intrinsic properties but can be understood only within the
context of the larger whole’ was a profound revolution in the history of Western
scientific thought. The tremendous shock in twentieth-century science is that
‘living systems cannot be understood by analysis’ (Capra & Luisi, 2014, p. 66).
In contrast to analysis (originating from ancient Greek ‘ana’ and ‘luein’,
meaning ‘loosening up’), in which you take something apart to understand it,
system thinking concentrates on putting things in the context of a larger whole.
This makes systems thinking contextual, which is the opposite of analytical
thinking.
 Transforming Our Critical Systems 11

Since the start of the industrial revolution, our focus on growth has led to an
ever-thickening web of interdependence worldwide (Senge et al., 2007). At
a global scale, cities are connected through investment patterns, consumer
choices and international trade. As a result, actions on one side of the planet,
which affect supplies ranging from pharmaceuticals to imported staple food,
affect livelihoods and employment on the other side of the planet. For example,
during the Bangkok floods of 2011, local manufacturing facilities flooded
completely and were inoperable for almost two months. As a result, global
supply chains for computer and automobile components were severely dis-
rupted, which led to temporary factory closures and lay-offs in many cities
outside Thailand (Tyler & Moench, 2012).
The term ‘systemic’ relies on the concept of elements or components coming
together to create a unified whole or a collective of participants. Systemic means
‘of or relating to the system’ and relates to the complex interactions of multiple
actors and conditions in a system. It is often used to describe some phenomenon –
an illness, a social problem – that affects every part of an entire system. Of the five
interpretations of the word ‘systemic’ that Midgley and Lindhult (2021) identify,
the two dimensions most recently introduced in the literature on systems thinking
are ‘collaboration’ and ‘thinking and action’. Collaboration recognises the inter-
dependency of actors in a community or business setting, leading to a need to
innovate and co-create value together. In the thinking and action dimension,
change is viewed as a process constructed in such a way that ‘participants within
it use methodologies, methods and techniques to make their thinking and action
more systemic’ (Midgley & Lindhult, 2021, p. 643). Following these definitions,
the term ‘systemic change’ refers to change involving multiple actors in a system
of often interconnected systems, such as social, institutional, cultural, political,
economic, technical and ecological systems, as long as it operates in the context
of thinking and action towards creating change, which is required when efforts to
change one aspect of a system fail to fix the systemic problem.
In the 1980s, prominent American universities and their business schools
started focussing on systemic change. It began to gain traction in business and
management fields as a way to address the complex and interrelated challenges
faced by organisations and society (Bennis & O’Toole, 2005), emphasising the
need for a holistic, collaborative and integrated approach to problem-solving
rather than relying on isolated or incremental changes. Systemic change affects
how the whole system functions (including all its components and relation-
ships), and the change must be fundamental. Moreover, it often changes the
system’s output (the system-changing impact created).
British plant ecologist Arthur George Tansley coined the term ‘ecosystem’ in
1935 to characterise animal and plant communities. In 1993, James F. Moore
12 Reinventing Capitalism

used the biological ecosystem as an analogy to explain business environments

and introduced the term ‘business ecosystem’ (Graça & Camarinha-Matos,
2017). A business ecosystem is ‘an economic community supported by
a foundation of interacting organisations and individuals – the organisms of
the business world. This economic community produces goods and services of
value to customers, who themselves are members of the ecosystem’ (Graça &
Camarinha-Matos, 2017, p. 237). In an interdependent business environment,
the business ecosystem actors ‘co-evolve their capabilities and roles’ (Graça
& Camarinha-Matos, 2017, p. 237). A business ecosystem approach allows
a vast network of actors to collaborate, build systemic solutions and create
holistic ways forward. It represents a new operating logic that is essential to
achieving systemic change (Kapetaniou & Rieple, 2017). For some compan-
ies, like start-ups, the business ecosystem logic is at the core of business.
However, for other companies, a more cooperative and open approach,
collective action, bilateral partnerships, holistic thinking, sharing know-
ledge and capabilities or sharing risks in initial capital investments, and
systemic understanding at the individual, organisational and societal levels,
are challenges.

1.3 A New Notion of Value

Focussing solely on GDP growth as a measure of value might have seemed
reasonable when civilisations were unaware of environmental and social con-
straints. However, there is ample evidence today that reality is complex and that
we must strike a new balance. Our systemic challenges of the climate crisis,
natural capital destruction and rising income inequality unfairly impact the
bottom of the pyramid, putting pressure on the social contract and risking
geopolitical stability while materially impacting business. Whether we believe
that policies and regulations should be used to shape new forms of production
and consumption, or that new technologies will magically solve all our prob-
lems (tech utopianism), our growth model and definition of value need to be
revised for the societal and environmental realities of the twenty-first century.
There is a need for a new growth model that works with nature rather than
against it, that emphasises well-being in the longer term rather than the short,
and that encompasses everyone rather than just a fortunate few.
Business leaders and academic experts have developed various models to
redefine value. While a sustainability transformation is underway, challenges
and resistances remain. Nevertheless, there are currently five leading value-
creation concepts that reconceive business’s value to society (Weenk & Henzen,
2021):
 Transforming Our Critical Systems 13

1. Stakeholder Value: Central to this concept is how stakeholders work

cooperatively to create value through a set of relations among specific
groups that have a stake in the activities and outcomes of the business and
upon whom the business depends for achieving its objectives.
2. Blended Value: In this conceptual framework, businesses, investments and
non-profit organisations are evaluated based on their ability to generate
a blend of social, environmental and financial value. This holistic approach
is sometimes used interchangeably with the triple bottom line’s people,
profit and planet.
3. Shared Value: In this framework, a business’s success and social progress
are interdependent. It enhances a business’s competitiveness while advan-
cing the economic and social conditions of the communities in which it
operates.
4. Sustainable Value: The framework views global sustainability challenges
through the business lens, which helps identify the right practices and
strategies to contribute to a more sustainable world, while simultaneously
driving shareholder value.
5. Integrated Value: This relates to the simultaneous building of multiple
‘non-financial’ capitals, such as human, ecological, social, technological
and infrastructural capital, through synergistic innovation across the nexus
economy (including the circular, well-being, access, exponential and resili-
ence economies), that results in net-positive effects, thus making our world
more satisfying, sustainable, shared, smart and secure.

As awareness of our need to find new value-creation models grows, paradigms

shift. New growth concepts and paradigms are emerging around these new
notions of value. In 2004, Wen Jiabao, the Chinese premier, had ambitions for
a green GDP index to replace the Chinese GDP index as a performance meas-
ure: green gross domestic product (GGDP) is a measure of economic growth
with environmental consequences (degradation, resource depletion, cost of
protection and restoration) of that growth factored into a country’s conventional
GDP. But, in 2006, the first GGDP accounting report showed that the financial
loss caused by pollution was $66 billion, or 3 per cent of China’s economy
(China Dialogue, 2006). As the adjustment for environmental damage would
reduce the growth rate to politically unacceptable levels, nearly zero in some
provinces, the government withdrew its support for the GGDP methodology the
following year. However, in China’s recent push for greener development,
experts have argued for the return of GGDP, and China’s Five-Year Plans
now explicitly make local governments accountable for environmental quality
and ecological conservation (Wang, 2016).
14 Reinventing Capitalism

Like the leading value-creating concepts or the GGDP, more concepts recog-
nise natural and social capital alongside economic capital as sources of value
and well-being. In the same way that an investment in economic capital, such as
production capacity or financial assets, can yield economic profits, natural
capital (the stock of biomass, biodiversity or natural resources in sustainable
natural cycles) produces value in the form of natural services, such as clean
water, clean air, food, natural resources and medicine (almost half of our
medicines originate in nature) or even recreation space (Wong, 2001).
Moreover, societies with high social capital, referring to the extent to which
individuals are educated, physically and mentally healthy and part of a safe,
transparent and inclusive society, yield trusted, collaborative relationships that
are much more productive than societies with lower levels of social capital.
Recognition of social and natural capital alongside economic capital gives rise
to new ways of framing and calculating growth. The concept of Gross National
Happiness, pioneered by the Bhutan government, inspired Jeffrey Sachs at the
Sustainable Development Solutions Network (SDSN) to develop the World
Happiness Report. It ranks countries based on a mix of criteria, including GDP
per capita, social support, life expectancy, freedom to make choices, generosity
and perception of corruption. Even though the economic picture is uneven across
Europe, the democracies of continental northern Europe provide interesting
learning on how highly transparent, egalitarian, inclusive societies that value
natural and social capital alongside economic capital consistently rank among the
world’s happiest countries. Finland, Iceland, Denmark, the Netherlands, Sweden
and Norway ranked among the World Happiness top eight every year from 2019
to 2022 (Helliwell et al., 2022).
The triple bottom line concept of ‘people, profit and planet’ has evolved into
frameworks that aim to optimise value creation within planetary and social
boundaries. Doughnut Economics, championed by Kate Raworth (2017), iden-
tifies the space in which humanity can optimise its well-being, while making
sure not to break through the social foundations of individuals’ equal and
fundamental rights to education, health, justice, housing, energy, food and
income or to exceed the ecological boundaries for factors such as biodiversity
loss, air pollution, freshwater withdrawals, land conversion or climate change.
The City of Amsterdam (2020) in the Netherlands is the first city to adopt the
Doughnut Economics model to inform city-wide strategies and developments to
provide a good quality of life for everyone without putting additional pressure
on the planet.
A more constructive focus on the shared value potential is provided through
the concepts of regenerative and inclusive growth, which aim to restore natural
and social capital and resilience while being economically sustainable.
 Transforming Our Critical Systems 15

Originally applied mainly in agriculture, regenerative business practices are

entering other sectors such as tourism, medicine and consumer goods. For
example, Danone (2017) is teaching and incentivising regenerative practices
to farmers in its supply chain and frames it as a crucial part of its commitment to
become water impact positive and achieve net zero emissions by 2050. At
a global level, the Bonn Challenge (2011) has already mobilised commitments
from sixty countries in the last decade to restore 210 million hectares of
degraded and deforested land. Even though the commitments are numerical,
and the quality of reforestation remains an issue, the challenge is on track
towards bringing 350 million hectares into restoration by 2030.
Nature-based solutions (NBS) are based on the realisation that nature can be
our biggest ally. Restoring or leveraging nature’s ability to provide its services
can yield substantial economic, environmental and health benefits. For
example, knowing the potentially disastrous impact of their activity on coastal
ecosystems, several oil companies around the world have started investing in
mangrove restoration projects. The high carbon-sequestration potential of man-
groves, removing up to four times more CO2 from the air than mature tropical
forests, contribute to these companies reaching their carbon reduction targets
while providing essential benefits to coastal communities through increased
biodiversity, fishery nurseries and coastal protection. Another example of cost-
effectively harnessing nature is how New York City achieves some of the
cleanest drinking water of any city in the world (Hu, 2018). By investing
$1.7 billion since the early 1990s in conserving 400,000 hectares of the
upstream watershed and letting nature filter its drinking water, the city has
avoided building a massive $10 billion filtration plant and is saving at least
another $100 million annually on its operation.
Especially when dealing with environmental challenges, through hundreds of
millions of years of evolution, nature harbours enormous wisdom and potential
solutions to our problems. As explored in Janine Benyus’s (2002) work, bio-
mimicry is the design and production of structures, systems and materials
modelled on biological entities and processes. In addition to us sourcing
medicines from nature, the fascinating discipline of biomimicry has inspired
multiple innovations, such as:

• reverse osmosis membrane filtering technology that is used for water purifi-
cation and desalination and that mimics how the roots of mangrove trees
separate salt from seawater;
• water harvesting from the air, already deployed as an essential solution to
water scarcity in places like Ethiopia and Chile, that was inspired by
Stenocara beetles surviving in dry climates;
16 Reinventing Capitalism

• the growing application of passive cooling techniques in architecture,

inspired by African termites drilling tiny holes to stimulate airflow to cool
down their mounds;
• the development of nano-paints, inspired by the skin of sharks and lotus
flowers, that reduce water resistance and increase ships’ speed and energy
efficiency.

Many new business models are emerging to achieve growth on a finite planet,
decoupling economic growth from material use and focussing on satisfying
needs rather than providing goods, thus dematerialising growth. The sharing
economy, or collaborative consumption, aims to minimise material use per unit
of customer satisfaction by optimising the usage of existing stock and infra-
structure. For example, there are approximately 1.45 billion vehicles world-
wide, of which about 1.1 billion are passenger cars. However, the average car is
parked for 23 hours daily and is highly inefficient as less than 1 per cent of total
life-cycle energy input is used to move a person (Nagler, 2021). Carpooling or
car-sharing schemes, like ZipCar, Lyft or Uber, address this radical inefficiency.
This economic model has already disrupted several industries, especially asset-
intensive ones like transportation and hospitality. Despite this collaborative
consumption model having taken a hit during the Covid-19 pandemic, analysts
forecast that it will continue making inroads into the consumer goods, media
and entertainment, and health-care sectors and grow more than fivefold to
$335 billion by 2025 (PwC, 2015).
Anything-as-a-service (XaaS) also addresses this efficiency challenge, espe-
cially in fast-changing sectors such as information technology (IT), by offering
products, tools and technologies as a service over a network instead of on-site
locally. The XaaS models are expected to grow by 19 per cent annually between
2022 and 2028, reaching a $1.6 trillion market share by 2028 (KBV Research,
2022). For example, Signify, formerly Philips Lighting, offers lighting-as-a-ser-
vice to its public sector and commercial customers. The customers pay
a monthly service fee for light; in turn, Signify installs, operates and maintains
the lighting systems. These systems are designed for easy replacement and
repair during operational life, and, in the after-use stage, they can be easily
reused or recycled. Signify reports multiple benefits of its XaaS model, such as
a 75 per cent longer lifespan, a reduction in energy consumption, and
a significant emissions and energy reduction compared to its conventional
counterparts (Ellen MacArthur Foundation, 2023).
In 2012, a Google search for ‘circular economy’ yielded 22,600 results; that
exact same search today leads to more than 190 million hits. The primary
schools of thought related to circular economy are performance economy,
 Transforming Our Critical Systems 17

biomimicry, blue economy, regenerative design and cradle-to-cradle. The last

one, in particular, is seen as a conceptual breakthrough in the maturity of
circularity, but circularity itself is nothing new: between the 1970s and the
1990s, it focussed mainly on dealing with waste; from the 1990s to 2010 the
focus lay on connecting input and output in strategies for eco-efficiency;
currently, circularity focusses on maximising value retention in the age of
resource depletion, having introduced the 10 R strategy framework of
Remine, Recover, Recycle, Repurpose, Remanufacture, Refurbish, Repair,
Resell/Reuse, Reduce and Refuse (Reike et al., 2018). The circular economy
model focusses not just on eliminating pollution and waste, circulating mater-
ials and products for as long as possible or dematerialising consumption, but
also on regenerating nature in an economic system that benefits businesses,
people and the natural world equally. Shanghai-based company Waste2Wear is
an excellent example of adopting the circular economy model. It produces
100 per cent RPET (recycled polyethene terephthalate) from pre-ocean and pre-
landfill plastic bottles and RPP (recycled polypropylene) from end-of-life
single-use food containers and domestic appliances and turns that into yarn,
fabrics and other finished products. On top of this, it has also introduced an
award-winning sustainable supply chain management system that is verified by
blockchain technology (Waste2Wear, n.d.).
Dematerialisation models such as XaaS, the sharing economy and the circular
economy can be very successful due to lower per-unit footprint and cost.
However, the dirty not-so-little secret of these models might be harder to
address. As things become cleaner and cheaper, we tend to use more of them,
diminishing the beneficial effects of the new technology or measure. This is
called the rebound effect. For example, while XaaS brings down the per-unit
environmental footprint of IT solutions, the rebound effect of the increased
overall consumption of cloud-based services because of increased accessibility
is causing the industry’s overall environmental footprint to boom. Global
internet traffic has increased twentyfold since 2010, and data centres and
transmission networks today consume 2–3 per cent of the world’s electricity,
which is more than the entire global aviation industry (International Energy
Agency, 2022). The impact is expected to continue to grow in the decade ahead,
despite data service providers setting up centres in cold climate regions with
high availability of renewable energy, such as the Scandinavian Arctic Circle
and Iceland.
Shifting our focus of intervention, can we help societies be happier and
healthier by encouraging and providing more mental rather than material
growth? Without denying consumerism, brand builders are perfectly equipped
to optimise the intangible attributes in their product development and
18 Reinventing Capitalism

marketing, thus ‘dematerialising’ consumption without diminishing perceived

value. For example, Japanese culinary culture carries some of this philosophy,
mastering the art of serving one strawberry for dessert as the minimalist climax
of a special dinner.

1.4 Change in a VUCA World

Change is accelerating. In the early twentieth century, it took 75 years for the
telephone to scale to 100 million users. Mobile phones took 16 years, Facebook
4.5 years, Instagram 2.5 years, TikTok 9 months and ChatGPT amassed more
than 100 million users within 2 months of its launch in November 2022 (Milmo,
2023). The emergence of disruptive and exponential business models in
a hyper-connected, increasingly digital world is leading corporate and individ-
ual fortunes to be made and lost quicker than ever. For example, 52 per cent of
the companies listed in the Fortune 500 in 2000 no longer exist today. Within
one generation, Jeff Bezos and Elon Musk, founders of Amazon (1994) and
Tesla (2003), respectively, became the wealthiest people on the planet. Today’s
average tenure of an S&P500 company is less than twenty years, down from
sixty years in the 1950s (Capgemini Consulting, 2015).
Digital hyper-connectedness can be a force for good, as we have seen in
Ukrainian citizens connecting and coordinating their efforts to defend them-
selves against the 2022 Russian invasion. However, it can also be a destabilising
factor. Impulsive, indiscriminate sharing helps sensationalist fake news spread
online, contributing to the algorithms embedded in many social media feeds
polarising rather than uniting society. As a result, free speech has come under
discussion, and not only authoritarian governments are responding with stricter
internet controls.
So-called black swan events are on the rise. But these surprises might not be
entirely unexpected if we look at the bigger picture. As humanity continues to
destroy biodiversity and heat the planet, we also deplete nature’s ability to
provide natural protection against extreme weather events and pests or viruses
like bird flu or Covid-19. Recent events showed how sensitive to disruption
most industries’ supply chains are. Many governments are defaulting to
responding to crises by injecting enormous financial recovery packages into
the economy. However, as the world rebounds from the pandemic, supply
shortages in, for example, fossil fuels, compounded by the impacts of the
Ukraine war, translating into inflation levels not seen in most parts of the
world in forty years. This uncertainty is made investors nervous, thus pushing
up volatility in the stock markets. The S&P500 index in 2022 showed a level of
volatility not seen since the financial crisis of 2008.
 Transforming Our Critical Systems 19

Being a world population that is growing exponentially on a finite planet

requires us to urgently and radically reinvent how we produce and consume
if we are to remain within the Earth’s sustainable boundaries. Nevertheless,
despite progress over the last decades, mainly thanks to China’s spectacular
achievement of lifting 770 million of its people out of poverty in the last 40
years, in 2022 almost half of the global population still lived in poverty,
making less than $7 per day, a number that could rise further due to the
compounded effects of Covid-19 and the Ukraine war, according to the
World Bank (2022). This is forcing us to confront the ambiguous challenge
of dematerialising the consumption of a growing world population while
finding ways to provide affordable and accessible energy, health care,
nutrition and basic opportunities for the less fortunate members of our
societies.
Complex societal issues like the climate crisis, inequality, biodiversity loss
and natural capital degradation can no longer be ignored. The anticipated costs
and impacts of anthropogenic climate change are enormous. The United
Nations Environment Programme has estimated that the global cost of adapting
to the impacts of climate change is expected to grow to $140 billion–$300 billion
per year by 2030 and to $280 billion–$500 billion per year by 2050 (United
Nations Environment Programme, 2021). This has forcefully motivated
nations, cities and companies worldwide to commit to radical reductions in
GHG emissions. As of early 2023, more than 132 national governments have
made net zero commitments. In addition, more than 11,000 non-state actors,
including 8,300 companies and more than 1,100 cities, have also made net zero
commitments as part of the United Nations Race To Zero (United Nations
Climate Change, n.d.). This will require a radical reinvention of how we
produce, distribute and consume, affecting virtually all industries, supply chains
and geographies worldwide.
In this VUCA reality, companies need to reinvent themselves and the systems
they are part of. However, VUCA means that it is increasingly hard to under-
stand and predict the future and the outcomes of one’s actions. Strategies can no
longer be based on extrapolating existing situations and legacy business models
but must increasingly lean on the agile pursuit of a compelling vision supported
by multiple stakeholders. Nevertheless, due to exponential technological pro-
gress and the size of our impact (compare a train derailing at 30 kilometres/hour
in the early 1800s to one derailing at 300 kilometres/hour today), the stakes are
too high to continue progressing through trial and error. Our imperative to
achieve change in a VUCA world increases the importance of a specific set of
future-fit leadership skills and the ability to collaborate, which we discuss in
Section 3.
20 Reinventing Capitalism

BOX 1 HOW DOES VUCA AFFECT CHANGE PROCESSES AND WILLINGNESS

TO CHANGE?

For one thing, VUCA calls into question the applicability of traditional
change management models such as Lewin’s U-model, Kotter’s 8 Steps,
and Design Thinking. These have already received criticism for paying
too little attention to the most challenging aspect of the change process:
actual adoption by its stakeholders. AVUCAworld amplifies what Herbert
Simon (1957) described as bounded rationality, that is, people having
limited information and lacking the attention spans and computational
capacity to digest the complexity they are faced with, limiting their ability
to take rational decisions as assumed in neoclassical economics.
Understanding the irrationality of decision-makers via the lens of behav-
ioural science can be helpful. In a VUCA environment, these irrational
aspects of human nature, which include a tendency to reject change and
avoid uncertainty, memory distortion, poor prognostication of future behav-
iour, and vulnerability to physical and emotional states, tend to become
more pronounced. When trying to convince stakeholders to collaborate, it is
helpful to consider and influence both the fast, automatic and subconscious
decision-making process, as described by Kahneman (2011), and the slow,
deliberate and conscious process. It is also vital to become more deliberate
in framing situations, options and decisions in ways tailored to the various
stakeholders’ values and preferred languages.
Uncertainty and volatility are associated with higher risk. As people
are naturally certainty-seeking, uncertainty usually induces them to act
in ways that reduce uncertainty, such as by seeking information.
However, in a VUCA world, uncertainty and ambiguity are the norms:
priorities change, information is unreliable and results are difficult to
predict. If new information is unclear or ambiguous, information over-
load and paralysis-by-analysis may happen. Moreover, ambiguity hin-
ders decision-making; this is not conducive to any kind of change, let
alone systemic change. Nevertheless, research has shown that it rather is
attitude towards ambiguity that is a robust predictor of willingness to
engage in costly social behaviour to enrich a shared knowledge base and
build a shared understanding and vision that can support decisions and
actions (Vives & FeldmanHall, 2018).

1.5 We Are Running Out of Time

In the early 1970s, Paul Ehrlich and John Holdren developed and popu-
larised the IPAT equation to describe how humanity’s impact (I) on the
 Transforming Our Critical Systems 21

Figure 2 Humanity’s impact is a function of population, affluence and

technology.

planet is a function of population size (P), affluence (A) and technology

(T) (see Figure 2) (Holdren, 2018).
Population growth has not helped to lessen the human impact. A hundred
years ago, a newborn would have come into a world with fewer than 2 billion
people. The number of people on our globe exceeded 8 billion in
November 2022 (The World Counts, 2023). Although relative growth has
slowed significantly, the population of the globe continues to rise by 200,000
people every single day. Affluence, the amount of consumption per person, if
reflected as a measure of per capita GDP, albeit spread unevenly, has more than
tripled worldwide in the last thirty years (World Bank, 2023). This puts all our
hopes on technology. Tech-utopianists will argue that technology is a powerful
force that has brought tremendous progress in many ways, and they trust that
technological innovations will solve humanity’s problems (Hickman &
Banister, 2009). However, they frequently overlook three crucial elements
that have caused impact to rise far more quickly than it has fallen as a result
of improved technology:

1. The rebound effect: As described in Section 1.3, price reductions brought

on by efficiency incline us to consume more of what we intended to
conserve. As air conditioners become more efficient, we install more of
them. As flying has become cheaper in the last fifteen years, the number of
miles travelled has more than doubled.
2. The unintended consequences of technological advancement: The prom-
ise of positive features frequently causes us to overlook the potential nega-
tive impact of innovations. Examples are when new technology, such as 5G,
exacerbates inequality because the investment required to provide the
22 Reinventing Capitalism

technology is feasible only in rich and densely populated geographies, or the

way social media not only connects people but also facilitates the spread of
misinformation, not to mention the impact it has on the psychological well-
being of many users.
3. Politics and vested interests: Even though money is available to address
issues like poverty, climate change and pollution, the adoption of technological
innovations frequently slows down due to opposed political ideologies or the
influence and interests of legacy industries, such as the fossil fuel industry.

Given the dramatic and unfavourable trend of the components making up the above
formula, the world must catch up on almost all of the United Nations SDGs.
According to the latest SDG Report (United Nations, 2022b), significant challenges
remain for most SDG indicators, especially in low-to-medium-income countries.
As of 2023, only 18 per cent of the SDG targets are on track, with most facing
serious challenges and 15 per cent of SDG targets, including those on hunger,
poverty and CO2 reversing (Sustainable Development Report, 2022). According to
the United Nations Framework Convention on Climate Change (2016), by 2030,
GHG emissions must be reduced by 45 per cent from 2010 to prevent global
warming from reaching uncontrollable levels. All national action plans together,
however, might not be enough: taking all national action plans as of October 2022
into account, in the upcoming eight years, emissions are still anticipated to climb by
10 per cent (United Nations, 2022a). Moreover, in its latest update of March 2023,
the IPCC (2023) concludes that there are significant delays in implementing the
national action plans; these are pushing the Paris goal of limiting global warming to
1.5°C out of reach. The IPCC is instead projecting that without strengthening
policies, an increase of 3.2°C by the end of the century is very likely.
We are running out of time for marginal, incremental improvements. It is crucial
to recognise when incremental change is insufficient for achieving desired object-
ives; now, revolutionary change must be attempted (Kenny & Meadowcroft, 1999;
Kates et al., 2012). In its climate report on impact, adaptation and vulnerability, the
IPCC (2022) warns that transformational change is no longer optional; it is
necessary. To keep the possibility alive of us living within the planet’s natural
boundaries in socially just ways, we must dramatically accelerate the sustainability
transition and radically improve the sustainability of some of the most critical
systems that support us, such as the food, energy, transport and infrastructure
systems. Furthermore, we must rethink critical enabling systems such as financial,
urban, educational and social systems.
Governments are committing trillions to support mitigation and transformation
efforts over the coming decades. Sustainability is not a ‘nice to have’; it is critical
and urgent if we want to avoid the disruptions and the dramatic costs to natural
and social capital that are escalating under our business-as-usual model. We need
 Transforming Our Critical Systems 23

radical reinvention, not marginal or incremental change of our systems. Radical,

from the Latin ‘radix’, means ‘at the roots’, not shallow or superficial. The
societal need to mitigate and adapt to the effects of climate change and natural
capital loss and to radically reinvent our systems is the biggest challenge and the
most prominent commercial opportunity of this generation.
The order is tall. And the tension is rising. Many of our current critical
systems are not fit for the future and need to be reinvented. But systemic change
is hard and complex; we are running out of time and the context is more VUCA
than ever. This is why we need a better understanding of how systems work and
how we can create the conditions and equip our decision-makers to achieve
systemic change.

2 Where to Intervene?
Think of any complex value chain or system as a game of Jenga: removing or
replacing one block could disrupt the whole and influence all the other blocks
(see Figure 3). By focussing on entire systems and their many interrelated parts,
we can better understand how our decisions affect social, economic and eco-
logical problems and identify the opportunities for innovation and intervention
that will help us achieve our larger systemic goals.
To transition on time to the more sustainable models the world needs, we
need to organise and equip ourselves to radically reinvent some of our critical

Figure 3 A game of Jenga resembling a system: remove, replace

and disrupt.
24 Reinventing Capitalism

systems. Instead of minor tweaks and incremental change, the focus needs to be
on radical departures from the status quo to shift our current unsustainable
trajectory to one where normative goals for sustainability are achieved, and
political and economic power structures deliver the common good
(McPhearson et al., 2021). However, how can we stimulate and deliberately
steer systemic change, given the challenges described?

2.1 The WHAT, HOW and WHY of Systemic Change

The USA and the EU have launched projects of unprecedented ambition in
response to climate change. The US Senate approved a $369 billion climate
budget, aiming to halve US carbon emissions by 2030 from 2005 levels
(Morgan, 2022). The EU is backing up its Green Deal with various funding
mechanisms worth more than €1 trillion, including a Climate Action Fund and
a Just Transition Mechanism, with the objective to make the world’s third-
largest economy climate-neutral by 2050 (EUcalls, 2022). In the Asia-Pacific
region, a study by PwC (2022a) forecasts sustainability assets under manage-
ment to triple to $3.3 trillion between 2021 and 2026, showing that this part of
the world is quickly joining the race to create more sustainable models.
Transformation sometimes requires an upfront investment; therefore, finan-
cial and regulatory support in the early phases is vital to de-risk investments for
the private sector and accelerate the development of new solutions. However, it
is not the amount of money pledged that guarantees successful systemic change.
The question remains where and how to invest the resources. Which interven-
tion areas will most effectively drive systemic change?
To illustrate that intervention points are often counter-intuitive, system
thinking expert Donella Meadows (1999) often uses economic growth as an
example: ‘Growth has costs as well as benefits, but we typically do not count
the costs – among which are poverty and hunger, environmental destruction,
and so on – the whole list of problems we are trying to solve with growth!
What is needed is much slower growth and, in some cases, no growth or
negative growth’ (p. 1). She states that vision without action is useless, but
‘action without vision does not know where to go or why to go there.
Therefore, vision is necessary to guide and motivate action. More than that,
when widely shared and firmly kept in sight, vision brings into being new
systems’ (Meadows et al., 1992, p. 224).
To synthesise Meadows’ (1999) original intervention points for systemic
change, and create a practical translation for the business community, we
have categorised these levers into the WHAT, HOW and WHY of systemic
change in increasing order of transformational potential (see Figure 4).
 Transforming Our Critical Systems 25

Transcend
paradigms
Mindset &
paradigm
Goals
Self-
organizing
Rules
Information
Positive
Negative loops
loops

Stocks Delays
& flows
System Buffers
Parameters

WHY
HOW
WHAT

Figure 4 Levers for systemic change.

2.1.1 WHAT: The Conditions of the System

Tweaking parameters, such as price subsidies, minimum wages, bank reserves,
taxes and funding models for transition risk-sharing, can all improve systemic
change conditions (see Table 1). However, these levers can be categorised as
shallow or low potential intervention points (Meadows, 1999). Changing
a system’s parameters can help a system find a new balance, but systemic change
will often be limited unless supported by and coherent with a new mindset and
objectives. For example, a one-off windfall tax or increased capital gains taxes for
the wealthy, as discussed following the Covid-19 pandemic to address income
inequality, will not change the system if the system is still designed to have
economic gains flow towards capital providers. It will likely only motivate the
wealthy to find new ways to avoid taxes. Similarly, setting a minimum quota for
women on an executive team will not solve gender inequality unless efforts are
made to improve women’s access to relevant, quality education and change
corporate mindsets regarding equal opportunities and participation.

2.1.2 HOW: The Dynamics of the System

A more powerful lever over the performance (see Table 2) of a system is the
ability of actors to influence the rules of the system, for example through incen-
tives, punishments and constraints, or its structure, for example through the
strengthening of positive or negative feedback loops. This ability is strengthened
through improved information flows to and engagement of relevant stakeholders
and a fair distribution of power. A simple intervention in the flow of information –
adding a new loop of information – causes people to behave differently. For
example, sustainable food labelling and certification have increased consumer
ttps://doi.org/10.1017/9781009410311 Published online by Cambridge University Press

Table 1 Overview of the WHAT of interventions.

Intervention Realm of
Leverage point Example
area leverage

Price subsidies, minimum wage, emission standards, the average

WHAT Material
Constants, parameters, fuel consumption of a car, or environmental standards. People
or numbers care about these, but they rarely change behaviour: these
interventions will not kick-start systemic change and often have
unintended consequences

Material Bank reserves, water reservoirs, total amount of standing timber in

The sizes of buffers and
a production forest, or just-in-time inventories. A system can be
other stabilising stocks,
stabilised by increasing the buffer, but when the buffer becomes
relative to their flows
too big, it counteracts and the system becomes inflexible

Material Transport networks, plumbing structure, the population age

Structure of material structures, or water drainage systems. This leverage point is rarely
stocks, flows and their simple because the design of the physical structure has often
physical arrangement already been laid out and is hard to change

Process Lengths of delays, relative

to rate systemic change, The construction of a new powerplant and the change in demand
that causes systems to during its whole lifespan, or the time it takes for the ozone hole to
over-or undershoot close after harmful emissions seize
ttps://doi.org/10.1017/9781009410311 Published online by Cambridge University Press

Table 2 Overview of the HOW of interventions.

Intervention Realm of
Leverage point Example
area leverage

Process Strength of negative To keep a system within safe bounds, humans create negative
HOW feedback loop, relative to
impact (positive feedback
feedback loops and in nature they evolve (self-correcting):
internalising external costs, pollution tax, impact fees, or the
loop) they are correcting extent to which a lake can absorb nutrients and remain clear

Process Positive feedback loops are sources of growth, explosion, erosion

or collapse. An unchecked positive loop will ultimately destroy its
The fine-tuning of positive, system (e.g. the more the soil erodes, the fewer crops it supports,
self-reinforcing feedback the fewer roots and leaves to soften rain, so the soil erodes further).
loops Instead of introducing negative loops, it is more effective to
weaken and slow the positive loop by introducing progressive
income tax, inheritance tax, universal high-quality public
education, or green bonds

Design Structure of information flow Transparency, crowd-sourcing, or the democratisation of

(who has and does not have information, such as providing consumers with knowledge about
access to information) where certain products come from to make informed decisions

Design The rules of the system, such Policies to level the playing field, governing natural resources,
as incentives, punishments, incl. taxes and regulations, such as lowering taxes on the repair
or constraints of household goods to extend lifespan, reducing CO2 emissions
or addressing the current disposal and replacement culture

Design Power to change, add, Ability of farmers to organise the sustainable use of communal
evolve, or self-organise a pasture to improve soil quality for the whole community; or
system structure workers union representatives on a corporate board
28 Reinventing Capitalism

awareness. They are driving consumer behaviour change, as well as collaboration

and cooperation among different actors in the food value chain (Swinnen &
Kuijpers, 2019). Similarly, extended mandatory guarantee periods on appliances
are proving to slow down the buy-use-replace feedback loop, boosting local
repair and recycling business sectors and radically reducing waste in the system.
The systemic change potential of these medium-potential levers is enhanced if the
actors and stakeholders in the system share the same paradigm, mindset, purpose
and vision.

2.1.3 WHY: The Purpose of the System

The most powerful, deep leverage points for systemic change are related to the
intent and purpose of the system: What human or social need is the system
aiming to satisfy? What type of world is the system aiming to build? In practical
terms, this refers to the objectives set for the new system, the values and mindset
from which the new system emerges and the ability to transcend existing
paradigms (see Table 3). Kramer et al. (2018) have also underlined the import-
ance of mental models as highest potential intervention points from which to
change systems. They argue that due to the interdependent nature of the other
conditions of systems change (which they identify as relationships and connec-
tions, power dynamics, policies, practices and resource flows), intervening in
these deep WHY leverage points should be supported by consistent interven-
tions in the shallower HOW and WHAT leverage points. For example, to create
a world in which protecting or restoring natural capital is critical and where the
objective is to dematerialise, that is, decouple economic growth from resource
use, taxing critical resource use could make more sense than taxing income.
We want to suggest a refinement of Meadows’ original categorisation of
subsidies as a shallow WHAT lever. Direct price subsidies could be considered
shallow as they have the side-effect of distorting market mechanisms. However,
while market mechanisms ideally need a level playing field to function opti-
mally, policymakers realise that significant transformations require support in
the upfront investment required to develop and scale new solutions. Subsidies
have the potential to enable Moore’s law, accelerating the learning and cost
curves, thus facilitating the scaling of new technologies far beyond where they
would have scaled without subsidies, which might turn out to be crucial in
a world that urgently needs radical change (Wessner, 2003).
The direct industry and technology subsidies provided by China and the USA,
such as those announced under the $369 billion Inflation Reduction Act, are
putting pressure on Europe, which so far has been trying to steer clear of direct
subsidies, to join the clean tech subsidy race. However, acknowledging the
ttps://doi.org/10.1017/9781009410311 Published online by Cambridge University Press

Table 3 Overview of the WHY of interventions.

Intervention Realm of
Leverage point Example
area leverage

Purpose All 'shallower' levers, such as physical flows and stocks,

WHY feedback loops or information flows, should be pivoted to be
The purpose and goals consistent with the goals and purpose of the system. A system
of the system whose goal is to bring global equity will have markedly different
design, process and material features than a system
aiming to promote free trade

Purpose Mindset or paradigm

out of which the system
A regenerative’ paradigm: underpinning agricultural policies,
and its goals, structure,
strengthening natural capital and supporting social foundations
rules, delays, or
parameters arise

Purpose The power to question The conscious shift from a growth-based economy to a
and transcend the ruling steady-state economy, such as asking the question
paradigms 'is treating our planet as an infinite resource good for mankind?'
30 Reinventing Capitalism

potential of subsidising research, development and innovation (RD&I), such as

through Horizon Europe, the European Commission in late 2022 adopted amend-
ments to the state aid framework that make it easier for member states to access
Green Deal funds to financially support RD&I activities to accelerate the green
and digital transitions (Allenbach-Ammann, 2022). Leveraging public funding to
mobilise private RD&I funding and, more powerfully, facilitate RD&I platforms
and ecosystems will accelerate the learning feedback loop, amplify information
flows and allow more actors to participate in innovating the processes and design
aspects of a system. Subsidising RD&I efforts could therefore be seen as
a medium-potential HOW lever.
Mazzucato (2018) is a strong voice in favour of mission-oriented research
and innovation (R&I), demonstrating how public expenditure can de facto
operate as an industrial policy by addressing grand societal challenges such as
climate change. Mowery (2012) argues that lessons from the government’s
mission-oriented research and development (R&D) spending on national
defence, for example, could be applied to society’s grand challenges. Defence
R&D spending changed many systems beyond defence, facilitating the devel-
opment of solutions as wide-ranging as the Internet, the Global Positioning
System (GPS), radar, virtual reality and even feminine hygiene products
(Frohlich et al., 2019). While we acknowledge the subsidising of RD&I as
a potential lever for systemic change, we also want to recognise the risk of
biases and the malleability of research design. History is full of examples of
subsidised research where the underlying paradigm or mindset of the sponsors
influenced the research design and conclusions. Players in the tobacco, meat and
oil sectors have been spending millions on what they call a balanced scientific
approach; what they are referring to, in less euphemistic terms, is sponsored
research to downplay the negative impacts of their industries (Keane, 2020).

2.2 Lessons from Systemic Change in Practice

In their literature review of 301 articles on interventions in the food and energy
systems, Dorninger et al. (2020) concluded that 80 per cent of interventions are
not explicitly transformative (or systemic). We identified six key learnings from
our analysis of transformation examples and literature:

1 WHAT without WHY interventions are likely to deliver suboptimal

outcomes.
In our efforts to create the right conditions to enable deliberate transformation to
emerge from complex systems dynamics, there is currently a disproportionate
focus on parameter interventions, the WHAT realm, advocating for leveraging
 Transforming Our Critical Systems 31

existing mechanisms such as setting targets, introducing standards or providing

subsidies, but falling short on developing new processes or rethinking existing
ones as a prerequisite for achieving system-changing outcomes. Moreover,
a singular focus on parameter interventions poses a risk of creating interven-
tions that lack the interrogation of the dominant worldview, values and para-
digms that underpin the current system (Angheloiu & Tennant, 2020).
Shallow levers can potentially support systemic change, but shallow inter-
ventions may backfire in the absence of a suitable paradigm or shared mindset
on the part of the stakeholders. This became clear when the French govern-
ment’s decision to increase taxes on fossil fuels resulted in the violent ‘yellow
jackets’ protests that eventually forced the government to revert its decision.
Similar reactions followed the Dutch government’s efforts to curb Dutch farm-
ing’s nitrogen footprint by imposing limits and standards on agricultural activity
without giving enough attention to building a shared understanding and mindset
with the Dutch farmers and the public. Another, more corrosive way of backfir-
ing is that interventions in the low-potential-parameter realm invite greenwash-
ing or outright cheating. For example, while it lacks the adequate paradigm, the
car industry has a very significant role in fighting climate change; yet, in 2015,
decision-makers at Volkswagen and other car manufacturers decided to respond
to emissions standards by cheating on diesel emissions tests. This ‘Dieselgate’
scandal eventually caused the entire board of Volkswagen to be replaced and
cost the company more than $33 billion in fines, settlements and expenses. At
least this feedback loop was still functioning.

2 Lack of alignment between subsystems hinders systemic change.

Governance contexts, such as those of actors and subsystems, fragmented
institutional arrangements, contested policy processes and tightly constrained
or poorly delineated roles and capabilities of policymakers and administrators,
complicate collaboration for change at a systemic level (Geels, 2005; Smith &
Stirling, 2005). Creating systemic change requires a comprehensive approach
that considers multiple policy and regulation perspectives. A narrow focus on
problem-solving seems to lead to sectoral solutions, often developed in silos
that tend to maintain the status quo, while missing opportunities for larger
systemic changes (Hynes et al., 2020) and lacking consideration of planetary
justice and global democracy (Biermann, 2021). Even well-intentioned legisla-
tion aimed at prevention has yet to be successful in avoiding unintended
consequences (Hunt et al., 2020). A lack of shared vision and understanding
of the interdependencies within the more extensive system has been complicat-
ing India’s challenge to overcome conflicts among its environmental, poverty,
32 Reinventing Capitalism

energy and agricultural policies for decades. Efforts to support poor smallholder
farmers were negatively affecting the food system in India, as heavy subsidising
of electricity, water and fertilisers instead of investment in R&D and capacity
building resulted in groundwater depletion, soil deterioration and eutrophica-
tion of water bodies, while the state controls over pricing and distribution
complicated the creation of additional routes to market despite higher produc-
tion (World Bank, 2012). Countries like Norway and Finland have found ways
to achieve more-joined-up policies for public health and a sustainable food
supply by, for example, introducing a national food policy council to provide
integrated policy advice (Barling et al., 2002).
Another example of co-evolution and interdependency is the development of
hydrogen. Even though 200 years old, hydrogen holds excellent promise as
a clean power technology. However, its viability as a low-carbon option largely
depends on access to cheap renewable energy being scaled cost-effectively
(Baykara, 2018). Collaborating with multiple actors across the car manufactur-
ing value chain allows Swedish H2 Green Steel to scale up its hydrogen-
powered production of green steel in northern Sweden, where cheap, clean
and abundant hydro-power can be used to produce hydrogen. However, against
a backdrop of a forecast rise in demand for steel by more than one-third by 2050
and the need to reduce overall CO2 emissions by 50 per cent over the same
period, this begs the question of whether the build-up of cheap renewable
energy capacity can happen quickly enough for hydrogen to fulfil its potential.
Ironically, a sizable part of the forecast extra demand for steel is destined for the
construction of renewable power plants (Levi, 2021).

3 Silver-bullet solutions require increased precaution to prevent

unintended consequences.
As often promised by new technologies, singular interventions with significant
transformational potential can have critical unintended consequences. Today,
India’s Aadhaar digital identification (ID) system, introduced to ease welfare
payments to India’s most vulnerable and to combat fraud, includes 1.2 billion
Indians (Dalberg, 2019). It allowed India to go from a digital backwater to being
the world’s largest market for digital real-time payments in less than a decade
(ACI Worldwide, 2021). However, while it brought the majority of Indians into
the system, it increased the gap with more than 100 million still marginalised
Indians in harder-to-reach geographies or populations. Many private services like
opening a bank account, getting access to food rationing or school admission,
which are increasingly transitioning to Aadhaar too, are now even less accessible
to those excluded. Furthermore, precautionary voices have warned of the tool’s
potential to facilitate a surveillance state (Amrute et al., 2020; Ritson, 2022).
 Transforming Our Critical Systems 33

Multiple researchers have suggested that microfinance is an effective interven-

tion for the economic empowerment of the underprivileged, reducing poverty and
vulnerability and building human capital (Swain, 2012; Arora et al., 2013).
Lending to the unbanked, since Muhammad Yunus originally pioneered it in
the 1980s, experienced exponential growth, reaching tens of millions of borrow-
ers and winning him the Nobel Peace Prize in 2006. However, more recent studies
have shown that microfinance not seldom leads to over-indebtedness and exploit-
ation rather than empowerment (Schicks, 2013) and that the sector is especially
vulnerable to economic shocks (Wagner & Winkler, 2013). Well-intended
attempts to bring about systemic change require more deliberate upfront attention
to identifying and mitigating unintended consequences.

4 WHY interventions require investment in collaborative processes.

Systemic change can take several decades and often involves interconnected
changes to social practices, technologies, regulations, business models and
societal norms. This inevitably involves conflicts over the direction and the
pace of the change (Voulvoulis et al., 2022). The deeper leverage points have
more significant transformational potential (Fischer & Riechers, 2018).
However, it cannot be assumed that change in the WHY realm will not be met
with resistance, especially when deeply held norms and values are questioned. It
is essential to tackle this resistance and to provide new alternatives and oppor-
tunities (Pelling & Manuel-Navarrete, 2011). Without creating a constructive
and trusted environment in which system partners feel secure enough to ques-
tion the current dominant system and transcend its underlying paradigms;
without investment in a deep, joint understanding of the system; without paying
more attention to building and embedding the shared mindset and vision across
the system’s stakeholders, and without incentives for system-actors to collabor-
ate for systemic change, progress is doomed to be limited.
A deep understanding by all stakeholders of the human or societal need under-
lying the system, the multiple actors and dynamics involved in satisfying this need
and the life-cycle impacts that the current system is causing is crucial to inform the
shared objectives in any collaborative effort for systemic change. Intra-company,
intra-industry or technology-centric efforts to reduce impact offer at best partial
solutions, often running the risk of not necessarily reducing but rather relocating
life-cycle impact. For example, the car industry moving from combustible to
electric motors does not automatically mean that the environmental impact is
reduced. In fact, it relocates most of the life-cycle impact to electricity and battery
production. Even though the life-cycle impact will come down as the world moves
from fossil to renewable sources of energy, the embedded carbon footprint of an
34 Reinventing Capitalism

electric car today, because of the battery (depending on size and the energy source
used in production), is significantly higher than that of a combustible engine
vehicle. Moreover, it causes enormous other impacts, such as water depletion,
toxic waste, human rights violations and others in the mining for components like
cobalt and lithium, whose ominous nickname ‘white oil’ is already unleashing
a gold rush of its own in geographies such as Chile and Bolivia (Balch, 2020).
Because demand for batteries will lead to resource scarcity and the need for new
mines, electric vehicles (EVs) might save car manufacturers but they won’t save
the planet.

5 Old mindsets are unlikely to produce a new system.

Risk management as a mindset will not bring us the change to sustainable models
that the world needs. Some important risk factors, such as regulatory risk, materi-
alise too late, as regulation typically is put in place (long) after the damage has been
done. Instead, a risk management mindset incentivises greenwashing and lobbying
to avoid disruption and maintain the status quo. For example, Exxon and other big
oil players knew of the risks of climate change to society forty years before the
world started to change policies, a move that many fossil fuel companies have
overtly and covertly tried to delay, despite knowing the link between their business
and climate change. Risk management is not a solution, especially if targets are set
up as deals between industry sectors and governments, heavily influenced by
industry lobbyists and biased towards the status quo. In the context of the
Conference of Parties (COP) meetings, whose objective is to find a multilateral
agreement to avoid climate change, it is particularly ironic that 636 fossil fuel
lobbyists participated in the 2022 COP27 meeting yet that the 2023 COP28
meeting will be held in the United Arab Emirates (UAE) and chaired by the head
of UAE oil giant Abu Dhabi National Oil Company (Singh Khadka, 2023).
As long as companies are knowingly causing environmental or social costs
without paying for them, they are growing their profits unethically. The
International Monetary Fund (n.d.) estimates that the implicit global subsidy
to the fossil fuel industry from undercharging energy supply costs amounted to
$531 billion in 2021. If also taking into account the cost borne by society for
climate, environmental and air pollution impacts and foregone consumption
taxes, the implicit subsidy was as much as $5.9 trillion ($11 million per minute),
or 6.8 per cent of global GDP – expected to rise to 7.4 per cent of GDP in 2025
(Parry et al., 2021). In testimony before a US Congressional subcommittee in
April 2021, teen activist Greta Thunberg spoke out about the hypocrisy of
governments boasting of lofty goals while funding the very legacy sectors
they say they want to phase out or transform: ‘the fact that we are still having
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