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The Great DisruptionThe following is a speech by Paul Gilding delivered to the AGM of World Business Council for Sustainable Development Seoul, South Korea on October 31st, 2012.

G’day. It’s great to be here with you, to help open this meeting and set the scene for your discussions.
 
I last spoke to the WBCSD Council meeting about a decade ago in Berlin. Then, as now, I looked around the room and concluded that if you wanted business leaders to help lead the charge towards sustainability, to drive the change we need to see, to be bold and brave in challenging times, then this, here in this room, is as good as it gets – and this is good enough.
 
Before I share my thoughts on why, let me give you some context to my remarks.
 
I have spent nearly 40 years working on sustainability issues, nearly all of them deeply engaged with the business community. The first 15 years I was a traditional activist, starting on human rights questions. In my first protest at the age of 17, I chained myself to the gates of the South African embassy in Canberra, after the shooting of school aged children in peaceful anti-apartheid demonstrations in Soweto.
 
From there, after serving for some years in the Australian Air Force, I focused on environmental issues, blockading nuclear armed ships from entering Sydney Harbour. I then joined Greenpeace, protesting against corporate pollution by plugging up toxic waste discharge pipes. I must have been good at my then chosen profession, as I was appointed at the age of 33 as the global head of Greenpeace in Amsterdam. This was the last laugh on my former colleagues in the Australian Air Force, with Greenpeace having it’s own navy!
 
Throughout this period I engaged with many corporate CEOs, including at the World Economic Forum meetings in Davos, as I saw great potential in the power of markets to drive positive change.
 
After five years at Greenpeace, I shifted my focus to directly engaging the corporate sector, owning and leading two sustainability focused companies. One of these advised large global companies, like DuPont, Ford and BHP Billiton, on how to align business strategy with sustainability.
 
After 15 years in business, I moved to my present role as an independent writer and advisor focused not on one societal sector but on the system as a whole. With my understanding of activism but also knowing the reality of changing markets, I spend my days observing, analysing and reflecting on the state of the world, and of humanity. As well as my writing, I advise companies, foundations, NGOs, governments and now even the military – on what I see coming. And that is my focus here today.
 
So with that experience framing my world view, I will share my thoughts on where humanity and your market is going. I have strong views – and an Australian tendency to be blunt and direct – so I hope you’re ready for a bit of that.
 
There is no doubt in my mind about the potential power of markets and business to be a positive force for change. There are, in the world of business some very smart and passionate people with enormous capacity to help society move forward. We have not yet seen that potential realised, but I know it is still there – waiting for its moment.
 
I know many of you think about these issues not just as business people but as citizens of the world, concerned about our collective future. Today, however, I want you to think about these issues as business leaders – as drivers of market change. Because it is from that perspective that you will be able to drive the most impact in your current roles.
 
So let’s think about sustainability as a market driver.
 
As a society, we’ve had 50 years of focus on sustainability. Indeed, this year is the 50th anniversary of one of the world’s seminal books in this area – Rachel Carson’s Silent Spring. It is also the 40th anniversary of the publication of the best selling environmental book of all time – The Club of Rome’s Limits to Growth; a book that methodically, and with hindsight we can now say correctly, laid out the path we would follow.
 
Over this intervening 50 years, we have studied and dissected this issue every way possible – the science, the technology, the human psychology and the economics. We know a great deal about the state we’re in.
 
So let’s recap what we’ve learnt.
 
– The science and the economics tells us that the ecosystem and the resources our economy depends upon are under severe pressure. Water, climate, soil and biodiversity are all on the edge. We are seeing the economic impact already, with various commodities, including food and oil, regularly hitting record highs, despite an economic climate that sees OECD countries bouncing in and out of recession.
 
– Of deep concern is that climate change is clearly accelerating. We are seeing impacts today that were forecast 70 years in the future, such as the melting of the Arctic sea ice. We are now seeing system wide changes we don’t understand and may struggle to control.
 
– Meanwhile, social challenges are growing rapidly, with poverty, increasing inequality, food crises and growing unemployment all leading to high levels of social stress, anger towards the elites and resulting political volatility.
 
– All this comes on top of a financial system that is overloaded and some would argue out of control. That system seems to have teetering on the edge of crisis, as it new normal.
 
– Taken together this means the global economy is in serious trouble, trapped between debt and growth. If we grow successfully, our resource and climate challenges will break us. If we don’t grow our debt will break us.
 
And so we come to a decision point. A decision point for society but also for you, who lead the business community.
 
The good news is we know how to fix all our problems. We know the science, we have the technology, we understand the economics and we know what policy works. This means we know how to deliver new technology into the market, we know how to create the jobs we need and we know how to produce enough food to ensure social stability. So be in no doubt that we have the capacity to act.
 
The problem is that we are asleep at the wheel. We think we have time, but we don’t. We are in deep denial about the severity and immediacy of the crisis we face.
 
I should make it clear before I go on, that I am not here to tell you this is a hopeless cause.
 
I am here to tell you that any objective analysis concludes we are clearly on the edge of a great crisis – one that threatens our future – and therefore, we will soon end our denial, wake up and get to work.
 
I will return to that, but first, it is important to understand that right now, we are asleep at the wheel, we are racing towards the cliff, and yes if you look over that cliff – a response of fear would be quite rational.
 
However, do not confuse my message with the one you’ve heard from environmentalists for decades – that if we don’t change terrible things will happen. That moment is well past.
 
My message is that terrible things are now happening but we are going to respond – and so it’s time to get ready. Time for you as business leaders, to grab the steering wheel and help to turn it – so we don’t go over that cliff.
 
That is my core my message to you today. The question is not will this crisis happen, but how will we respond when it does? Who will be ready, and therefore who will make it? Will we respond intelligently and leverage the crisis? And how fast will we get through it – is this a century of chaos or a few decades of a messy but successful transition?
 
Any reflection on all this will lead you to conclude that humanity is in a very strange place right now. What I’m arguing here is widely accepted because the science is very clear on the limits we face. Limits that are set by the laws of nature, by the rules of physics and chemistry. And as the east coast of the United States is learning today, limits do not adapt to our economic or political convenience. Mother nature doesn’t negotiate.
 
Consider our response to date. We know, if we go past 2 degrees of global warming, some would argue much less, we face civilisation threatening impacts on society and the economy. Yet we walk in circles and can’t imagine how we can change. As a result, we assume we won’t change and so we plan to just carry on.
 
Take a step back and think about the logic of that idea, remembering that this is the dominant view in business today. That view, is that faced with a threat to civilisation, a clear risk of global social and economic chaos, we will continue to do nothing substantial to change.
 
This is of course ridiculous. And it’s not how this will unfold.
 
We are just responding as we always do when faced with challenging and complex issues that demand very significant change.
 
We go into denial – and stay there for as long as we possibly can. We avoid reality with soothing reassurances that it’s not that bad, that we still have time, that we can’t afford it, that we can’t make the change happen until someone else does something. Beside what can I do? It’s really up to others – government, consumers, other companies, other countries – let’s just call them “they”.
 
That’s the strongest act of denial – that we can’t fix this until they do something.
 
We always do this. And we do it for as long as we can. Then when denial stops working, when the evidence becomes overwhelming, when we have no choice – then we accept there is no “they”. We accept that we are as good as it gets, and then we respond.
 
As Churchill said in relation to the United States, but he could have been saying it about us a species. “The Americans can always be relied up to do the right thing – after they’ve exhausted all other possibilities.”
 
So we will respond – and very soon – possibly within the next few years but almost certainly this decade. The question is who will be ready? Will the world’s preeminent big business organisation focused on sustainability be ready? Will your company be ready? Will it survive what’s coming? And perhaps most important of all, are you personally ready – are you prepared to use all your personal capacities and influence to help get us get through all this?
 
So what do we need to do?
 
Firstly we must now accept that we cannot avoid a serious, global crisis. We are locked in, with our current economic system, to pursue economic growth – and that pursuit will inevitably trigger climate impacts and resource conflicts that will define the remainder of this century.
 
It is no coincidence that I now get called in to talk to the world’s militaries and security forces. Those who are professionally focused on sources of systemic tension and conflict see what’s coming. Anybody who chooses to look, can see what’s coming.
 
So the task is not to prevent a crisis, that moment has passed. The task we face is to manage the crisis, and critically in your context, to first survive, and then to thrive in the world on the other side. This crisis is not the end of civilisation – in fact if we get it right, it could be the beginning of civilisation instead.
 
Let’s take a look at the very practical and immediate challenge of climate change. But before we do, let’s remember we shouldn’t confuse climate change with being the issue we face. Climate change is a symptom of our problem. Our problem is an economic system one – the challenge of inequality, of resource constraint, of food supply and our model of human progress. It’s the crazy idea that we can have infinite growth on a finite planet.
 
Consider that today, according to the scientists at the Global Footprint Network, our economy is operating at about 150% of the planets capacity. Do you really think we can grow the economy three of four times bigger by 2050?
 
Of course we can’t. We will have to face this reality before too long.
 
But today, climate change is our most immediate challenge, and in this context, gives us a clear example of both the scale and speed of the broader change we face – and the enormously exciting opportunities for those who are ready to lead, guide and deliver it.
 
At its core, securing a safe climate is about a revolutionary transformation of our energy system – with dramatic economic consequences for virtually every industry and national economy.
 
First, let’s look at what we know. At its simplest, climate change can be understood as a finite resource issue – limits defined by physical absolutes.
 
The climate behaves in clearly defined ways according to how much CO2 and it’s equivalents is present in the atmosphere. And we know as a matter of simple maths, there is a certain amount of carbon we can burn – coal, oil and gas – to reach a given concentration of CO2.
 
We also know that we have an agreed maximum target of 2 degrees of global warming. As I said, some argue, including me, this is far too high, but let’s accept 2 degrees in this context , given that every company in this room and every major country has accepted 2 degrees as a line we definitely cannot cross.
 
Then we put the math together. We know from the Potsdam Institute for Climate Impact Research that to reduce the risk of crossing that 2 degree threshold to around 20% – to give us an 80% chance of not spiralling out of control, gives us a carbon budget. On current forecasts the entire budget – all the coal, oil and gas we can ever burn – will be consumed in a little over a decade. That will then leave around three quarters of all the currently known, economically recoverable reserves unable to be burnt – reserves that are today the key assets of listed companies. Just consider the consequences when the markets realise that this financial carbon bubble will burst.
 
Think about all this in an economic and geopolitical context. It means we face a choice between tipping society and the economy over the edge into a century of chaos, conflict and suffering, or to embark upon the most rapid, dramatic economic transformation in history – to remove the coal, oil and gas industries from the economy within a few decades – and we only have that long if we start now.
 
Hard to imagine? Yes it is. Almost incomprehensible actually.
 
But it’s even harder to imagine the alternative. Do you really think, when we accept we are faced with the potential collapse of civilisation, we will stand by and do nothing. That you will stand by and do nothing?
 
No, Churchill is right. We can always be relied upon to do the right thing – after we’ve exhausted all other possibilities. And those other possibilities are almost done.
 
So what does all this mean for you? For the WBCSD as an organisation, for your companies, for you as business leaders and for you as people.
We can argue around the edges of my analysis, but I challenge you to conclude I am definitely wrong. Because if you think there is a possibility I am right, then we have a lot of work to do.
 
While I’m using climate as an example because of its immediacy and economic clarity, I could equally describe this process around food, or water, or social aspects like inequality – and we can’t ignore any of these issues. You see, when you operate a system past its limits, there are eventually consequences.
 
Permit me to quote Churchill once more, where he talks about the gathering storm of WWII. In a frighteningly relevant interpretation of the situation we face today, he said in November 1936:
“So they go on in strange paradox, decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all-powerful to be impotent… Owing to past neglect, in the face of the plainest warnings, we have entered upon a period of danger. The era of procrastination, of half measures, of soothing and baffling expedients of delays, is coming to its close. In its place we are entering a period of consequences …We cannot avoid this period, we are in it now…”
The good news in the comparison to Churchill, and to WWII, is that it is a strong example of human behaviour. As a species, we may be slow to respond, but we are then very good in a crisis. When our backs are against the wall we deliver.
 
And we’re not at the starting line, the transformation we must embark upon is well underway. Back to the climate example, we see this in the extraordinary growth and resulting price reductions in solar and the now inevitable decline of coal.
 
Investment in renewables is up 90 per cent since the start of the financial crisis. How many of your companies have grown 90 per cent in the last four years?
Just last year, we saw the price of solar panels drop 50 per cent and it’s expected to keep falling until it becomes the cheapest form of energy, perhaps later this decade.
 
While climate is just one issue, it’s a good example of the economic threats and opportunities the broader transformation to a sustainable economy presents. It goes without saying that many business will lose in this transition.
 
They will fight against change with all their capacity and understandably so.
 
But we must stop pretending there is some other way forward, some win-win strategy where all businesses can be better off. There is not – there will be big winners but also big losers.
 
This is just the normal market process – it’s Schumpeter’s creative destruction at work. This is why markets are the perfect vehicle to deliver the transition we need.
However where this transition is different, is speed. We have lost 20 years through our denial and delay. So to now deliver what the science says is necessary – the phase out of fossil fuels within a few decades – requires nothing short of a war like economic mobilisation.
 
This will be fiercely resisted by those who stand to lose. That’s OK, and that’s their right. But like a misbehaving teenager, we have to apply some tough love. We must set the boundaries of acceptable behaviour and apply consequences when those boundaries are crossed. And the market is the perfect delivery mechanism for such consequences. Investors take note of your carbon bubble.
 
We must remember through all this, that fossil fuel companies are not run by bad people. They are people like you and me and they are people in this room. They just happen to have landed on the wrong side of history and they have their own choices to make in that regard.
 
For all of us though, it is time to face the truth. It is time to end our denial. The science and the economics is very clear. If we carry on, our current economic trajectory would take us over the cliff and into chaos and decline.
 
We will not stand by and do that. So denial will end – and action will begin.
 
The choice you face is not whether that will happen, but how you will respond when it does. Will you wait until “they” do something? Or will you use all your personal capacities, skills, wisdom and influence to help the world get on track.
 
As you consider that question, I ask you to look around this room and indeed, look around the world at your fellow business leaders. Are you and are they up to the task? When I ask that, I come to a clear conclusion. This is, as good as it gets, and I think it’s good enough. And if not you, then who would it be?
 
Remember, we know what we need to do and we are capable of doing it. The business community and business leaders – you in this room – have the opportunity to stand up and argue for transformational change. The opportunity to stand up for what you know is right – for the economy, for your countries and for yourselves.
The clock is ticking and the alarm will soon go off.
 
So get ready, it’s nearly time to wake up and go to work.
 
Originally published at REneweconomy

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