daniel dahm - strategic transformations towards sustainability - colloqui di martina franca 2014

“Quale Economia,per quale Benessere”

22/24 maggio 2014

J. Daniel Dahm Strategic transformations towards sustainability. Pre-conditions and constraints on the way towards a green industrial revolution.

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Foul credits

Economical (monetary) productivity was purchased on ecological credits, and

ecological productivity was sold without consideration of its reproductive

premises.

“Quale Economia,per quale Benessere”

22/24 maggio 2014

Correlation between the stability of ecosystems, CO2-concentration and climatic changes, scenariocalculation, Potsdam Institute for Climate Impact Research, 2008

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Dr. J. Daniel Dahm | [email protected]

rethinking Economy

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New challenges calling for Sustainable Business Cultures

The variety of life, the productivity and regeneration cycles of energy and material on

planet earth are indispensable for the evolution of life and cultures, as well as for economical development.

Economy and ecology are inseparable; they are intrinsically tied together.

!

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1.  Adjustment of the regulatory framework and the policies of order for the economic practice

2.  Establishing new competitive business models

3.  Changing social norms towards sustainability

4.  „Empowerment“ of the agents of change (especially civil society ...)

Need for change

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Adjustment of the regulatory framework and the policies of order for the economic practice

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1.  Abolishment of the distortion of competition by (hidden) externalisation of ecological and social costs by production processes, value chains and logistics.

2.  Legal prevention of the commons equivalent to the private property. 3.  Enhancement of the requirement to publish results of companies and emitters of financial products towards

the comprehensive documentation of their ethical and ecological impacts and potential sustainability risks. 4.  Implementation and standardisation of ecological, social, cultural and measurements and ratingmethods for

companies and investments. 5.  Establishing of incentive structures and removal of barriers for sustainable (direct-)investments especially for

institutional investors; 6.  Obligation for all emitters of financial products to document comprehensively all risks, including the risks for

commons goods; 4.  Limitation of speculations on the coverage of business activities related to the real economy; 5.  Readjustment of the practice of credit accomodation of banks and all non-state financial institutions

(monetary financial institutions (MFI), Hedgefonds and similar future constructs) 6.  Implementation of a financial transaction tax.

Adjustment of the regulatory framework and the policies of order for the economic practice

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Establishing new competitive business models

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The ��SUSTAINABILITY-ZEROLINE ��– a severe Sustainability Benchmark

Source: J. Daniel Dahm, 2014

SUSTA INAB IL ITY ZEROL INE

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Development of the Sustainability-Zeroline-Benchmark



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SUSTAINABILITY ZEROLINE

Source: Global Footprint Network 2010, modified by J. Daniel Dahm, 2014

The Sustainability-Zeroline is a refinement based on the image of the “Overshoot” by the Global Footprint Network 2010. The Sustainability-Zeroline defines the fictive status of a total equilibrium of global biocapacity and global ecological footprint as “zero-line-benchmark” – the minimum requirement for sustainability (that is obviously not fulfilled).


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Biocapacity Ecological Footprint

Capacity

Demand


Biocapacity versus Ecological Footprint

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Biocapacity (Capacity)

Ecological Footprint (Demand)

Capacity minus Demand

Overshoot


Biocapacity (CAPACITY) versus Ecological Footprint (DEMAND)


The Sustainability-Zeroline provides an easy visible and comprehensible way to understand the relation and the disproportion between supply and demand for the ecosystem of the planet Earth. If the full capacity of the planet is equal to the full demand of mankind we have a kind of conservation of nature and natural resources. An ecological rebuild of our livelihoods is impossible with this, because the build-up potential of nature is completely absorbed. But – at least – we as mankind achieved a state of rest. Compared with today that would be already a great improvement. But if the demand (by economic activities and consumption) exceeds the supply of the ecosystem we experience an overshoot which is potentially deadly for our livelihoods – like “biting the hand that feeds you”. This situation mankind achieves since the early 1990s every year. Still – it is often misunderstood as growth. To overcome this fatal development and cognitive dissonance it is important to make this matter of fact easy to understand, like a profit and loss statement for our plant and our future. The Sustainability-Zeroline allows this.

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The Sustainability-Zeroline-Benchmark��– Geo-Biosphere and Anthroposphere (cumulated)



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Build-up (incl. internalisation + compensation)

Externalisation


Sustainability-Zeroline-Benchmark

Geo-Biosphere & Anthroposphere (relative)

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Build-up (incl. internalisation + compensation)

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Geo-Biosphere & Anthroposphere (total)

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New needs

New forms of co-operative actions and value creation are needed with a shared idea of

competition on the base of sustainability.

Future targets are the renaturation of degraded landscapes and ecosystems, as well

as strengthening the development of infrastructures for basic needs

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The right of the Commons #3

All humans have the right to utilise commons for their individual (private) and collective purpose, without exhausting or damaging them. The right to use them has to be connected with the obligation to preserve the commons.

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Therefore it is crucial, that the legislative forces a sustainable, commons-sensitive economic order. Externalisation has to be banned by law as impure distortion of competition.

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„The invisible hand of the market is invisible, simply because it doesn ´t exist.“ Joseph E. Stiglitz, Chief Economist of the World Bank and Nobelprice for Economy

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System failures

The financial crisis is resulting from

A) the ongoing total expansion of financial capital and private interests, and

B) a bio-destructible competitive environment.

Both together led into an ecological crisis, affecting all life-forms on earth including mankind.

The financial system and its credits did grow far over the productive and reproductive capabilities of natural and social capital.

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Externalisation and economy Annual environmental cost and market risks

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Need for adjustment: Sustainable Markets & Sustainable Investments

The last decades did distort, what a market economy could be.

To narrow markets towards an expansive financial capitalistic idea of short-term maximisation of

commerce and financial profits is alien for an intelligent concept of a market.

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Institutional investors face major challenges

§  Feelings of insecurity abound amidst extreme investment scenarios.

§  Traditional asset classes currently bear high risks:

§  Bonds do not hedge against inflation at historically low interest rates,

§  stock volatility hard to bear given strained risk budgets.

§  Investors increasingly consider absolute return approaches and alternative asset classes.

§  Sustainability is a global mega trend and chance of problem solving.

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Current situation regarding liquid asset classes

Stocks

High volatility makes risk and return forecasts more difficult.

Globalisation leads to increasing correlation within the asset class.

Crises increase correlation of stock and bond markets.

Bonds

Low returns reduce attractiveness of asset class.

Increasing risk of inflation devalues nominal claims.

Growing default risks even of government bonds aggravate asset liability management.

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Can alternative asset classes solve the problem?

Example: Precious Metals

•  Already high price level •  Insecure long-term price trends •  High volatility •  No current pay-outs

Example: Hedge Funds

•  Lack of transparancy •  Image problems •  Regulatory interventions imminent •  Disappointing performance within crisis

Example: Private Equity

•  High risks •  Bidding competitions •  Unreasonably high price level

•  Stable and predictable demand •  Barriers to entry for competitors •  High price inelasticity

•  Growing demand for organic agricultural products

•  Growing demand for sustainable timber products

•  CO2-compensation as add-on

Example: Infrastructure

Example: Timber &

Agriculture

Example: Real Estate •  Eco-trend offers competitive advantage for

green buildings •  Predictable long-term cash-flows

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Transforming financial capital into real capital

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What is needed: investing in real values

¡  Sustainable investments are build to last. Its projects and investments are long-term. Its business is sustainability.

¡  Sustainable investments are targeting sustainable infrastructures: solar/wind/water power, sustainable timber production and reforestation, biodiversity and renaturation, water desalination and purification, social ventures and education, clean tech and intellectual property, etc., thereby creating values and assets in the real economy.

¡  Sustainable investments are offering stable and risk reduced returns. No leveraging, minimum of financial market correlations.

¡  Sustainable investments are harnessing the potential of local communities, civil society and combine them by sustainable intelligence.

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Offering stable performance by harnessing sustainability

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Performance advantage: stable cash flows, optimal risk reduction, strong sustainability §  Demand-oriented, concrete benefits for people, communities and localities, serving energy needs;

§  Non-subsidy-dependent revenue streams through energy providing via Power Purchasing Agreements (PPAs) enables positive correlation along energy price development;

§  Geopolitical diversification of real infrastructure assets along optimal climate-ecological, political and socio-economic criteria

leads to superior risk-revenue ratio; §  Wealth-preservation by back coupling of financial capital into sustainable real capital;

§  Returns from utility generation and consumption;

§  Investment in real instead of nominal capital and high-potential infrastructure minimises risk; §  Integrated Sustainability Approach (ISA) reducing investment risks by empowering civil society, strengthening locational factors

and stabilising local ownership;

§  Creating economic commons with full stakeholder involvement (employees, civil society organisations, communities, local business sectors, educational institutions, policy makers);

§  Distribution of fair stock ownership through multishareholder-strategy

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CURRENT APPROACH

INTEGRATED SUSTAINABILITY APPROACH

•  EXAMPLE: Build 20MW photovoltaic power plant

•  Treated as isolated project, planned/managed by specialised contractors without sustainability expertise

•  Electricity is fed into grid at highly subsidised tariffs, irrespective of actual demand

•  Project driven by individual profitability approach

•  EXAMPLE: Develop 20MW integrated solar energy solution

•  Combination of smart-grid enabled central and decentral renewable energy sources for constant power supply and integration of several end-products improves overall quality.

•  Pooling of value-added steps of Integrated Sustainability Approach (incl. CO2 compensation and certification), increases ROI and builds sustainable infrastructures.

•  Requires sustainability trust

INTEGRATED SUSTAINABILITY SOLUTIONS CREATED BY UNITED SUSTAINABILITY INTEGRATED SOLAR ENERGY SOLUTION: •  Solar thermal unit (day & night) with 20MW

capacity ENERGY USED FOR:

•  Saltwater desalination

•  Supply of Freshwater for local population and agricultural use

•  Piping Infrastructure, Irrigation Systems •  Land improvement (Combating

Desertification) by Soil Fertilisation

•  CO2 Compensation and CO2 Certification

•  Electricity infrastructure supply for regional urban areas and Industries

•  Energetic Storage Capacities

Optional Scaling: Combination of decentralised residential and commercial roof-top photovoltaic through software and Smart Grid solutions to form a Virtual Power Plant

CO2

United Sustainability

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Integrated Sustainability Approach by empowering people

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Investment (i.e. energy

infrastructure)

Community & other

stakeholders

Local companies,

service providers, civil society, policy

makers, ...

Power Purchasing Agreements

Education, Employment, Empowerment

Exit via democratic ownership

model („privates to „commons“)

Multi-stakeholder- + Multi-shareholder-involvement

INTEGRATED SUSTAINABILITY SOLUTIONS CREATED BY UNITED SUSTAINABILITY

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„Empowerment“ of the agents of change (especially civil society ...)

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Urban subsistence – a principle of economic (dis)order

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Michelle Obama does it, her husband too. The First Lady invented a garden at the White House, it has

beeyards, she promotes community gardens. The US-President brews his own beer with the homemade

honey. It is a Honey Brown Ale, the recipe is published by the White House as open source, and it says

that it is not so bad.

Urban gardening, do-it-yourself, the self-made-revolution are the green topic of the feuilletons of the

last two years.

In Germany a political party puts open source and self-made politics on top of their agenda.

In Greece they self-made meanwhile entire hospitals.

The economy changes: classical consumer are becoming prosumer, who co-design and co-produce.

something ´s different

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The term subsistence comes from the latin word „subsistere“ = to resist/to sustain. Often subsistence is still associated with material minimal production of economies of poverty. But it is much more. In the subsistence economy – via subsistence work – great shares of the re-production and regeneration of natural and social commons are achieved. innovation processes and cultural creativity are mainly stimulated in the sphere of subsistence.

Urban subsistence is the urban form of self-supply. It is more service oriented than the rural agrarian subsistence, but is material as well as immaterial productive.

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Subsistence economy is not individualised but co-acting and co-liberal. It is an economy that is able to resist, to last. It is genuinely sustainable. Subsistence economy is needs-oriented, dynamised by the demands and is created out of own power.

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„The urban cicil society follows implicit civil rules, which also shape its own economic order - the (civil) subsistence economy.

It does not follow the logics of financial capital, of rivalry and competitive pressure, and it is not governed by offer, but oriented on the needs.

I call it urban subsistence, that is the urban economy of self-supply and self-sufficiency.“

J. D. Dahm, 2002

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The research results are leading to some impressive key datas, that may clarify additionally which dimensions of value creation are achieved in urban subsistence. On base of the researches we could calculate:

for Cologne ca 2,5 million voluntary working hours in civil society organisations for the whole community; for Stuttgart ca 1 million voluntary working hours in civil society organisations for the whole community;

On base of the available statistical datas and the research results form the cities of Cologne, Berlin, Stuttgart, and under consideration of the Freiwilligensurvey-Study from 2005 we come to the following amount:

for Germany around 5 billions hours unpaid, voluntary urban subsistence working hours per year, carried out nationwide by over two third of the citizens.

....essential efforts

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The economic dimension of the civil society builds in many perspectives the undercover base of many market-based processes, which do often harness unnoticed the performance of the urban subsistence. The future of cities will grow out of a complementary, reciprocally fruitful exchange of market, public and civil society efforts.

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Changing social norms towards sustainability

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Empathy and Freedom - The ethical base

Empathy and Freedom seem to be adequate to serve as pure ethical base for economy.

Taken such a norm for serious, it strengthens our argumentation: Debates about the logic and necessity of war, of hunger and prosperity gaps, of the conflict between man and

nature are baseless.

Its about a contest for the best sustainability strategies for new endeavours.

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The time is now to act – towards Sustainable Business Cultures.

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Banksy „Wet Dog“

Molto gracie - thank you very much !

Dr. J. Daniel Dahm

[email protected]

daniel dahm - strategic transformations towards sustainability - colloqui di martina franca 2014

Economy & Finance