End of Business as We Know It

Photo by Allen Sima

When it comes to creating a sustainable, green economy, failure cannot be an option — not least for future generations. That provocative statement was made in the opening remarks at a recent conference here in Tokyo organized by the European Business Council.

The keynote speaker at the event was Paul Roberts, author of the 2005 book The End of Oil, a tome that was inspirational in the launch of Our World 2.0 together with Richard Heinberg’s two ground breaking books The Party’s Over and Powerdown.

Roberts went on to write a follow-up best-selling book in 2008, entitled The End of Food, that explores the “stark economic realities beneath modern food”. He kicked-off his talk by explaining that his children think he should write books with happier titles and that he might sell more books as a result.

For Roberts, sustainability is all about green jobs, green technology and very importantly “guilt-free” products.

“We want, as businesses, as individuals,” he explained, “to feel confident that we can have economic growth, that we can have higher returns on our investments without driving our enterprise, our country, our planet off the cliff.”

But it is difficult for many to get behind sustainability when everything seems to be going just fine. The economy is said to be recovering (with the exception of parts of southern Europe), technologies are ever-advancing, we have empowered consumers, we have more access to resources, we feel that history is on our side and that we have been, and always will be, able to overcome obstacles.

“Since the beginning of the Industrial Revolution,” he continued, “we have gone from success to success.” As a result, we expect this to continue.

But the future won’t be like the past

We cannot, however, he argued, be complacent and when making forecasts about the future we cannot just use the past as evidence, although in my view it may well be a useful guide. Reflecting on Roberts’ words, I am concerned that we seem to conveniently ignore lessons of previous failed civilizations and we are apparently still unable to fully comprehend the consequences of the advancements we make at breakneck speed, while the precautionary principle often falls forgotten under the wheels of progress.

Indeed we should be very worried, Roberts continued, as we struggle to cope with a series of new risks that pose a fantastic challenge for the future of humanity and the planet.

Climate change, he argued, is game changing in every sector. But even if you were to ignore climate change and, for academic purposes, assume it is a hoax, the scale of the other challenges we face today will keep us very busy.

Another issue that should concern us is the price of inputs to our industrial and economic system. Roberts shared data on the price of crude oil over time and showed that we find ourselves in a period of high volatility and high prices. From an historical perspective, he explained, looking back over the past 150 years “we are paying more for our oil now than we were before the oil industry was industrialized”. This is in spite of the fact that today’s oil industry is super-efficient, has more technology and operates on a huge scale.

Yet, it was during the decades of comparatively low oil prices that it was possible to build our global economy and we did so on the assumption that oil would remain cheap and stable in the foreseeable future. But we now have to come to terms with a new reality of ever increasing oil prices.

“We want, as businesses, as individuals, to feel confident that we can have economic growth, that we can have higher returns on our investments without driving our enterprise, our country, our planet off the cliff,” says author Paul Roberts.

Today’s high prices are explained by a number of factors. For instance, the number of new oil field discoveries is going down (the peak was in 1960) and the fields we do find today are getting smaller. The oil that remains underground is also much more expensive to extract.

“We are having to drill far deeper,” says Roberts. “We are having to work in hostile environments — the Arctic, Siberia — and the costs are significantly higher.”

Another issue driving prices is political instability with most oil reserves in some of the least stable countries in the world, mainly in the Middle East. Taking this into consideration, he continued, “you can recognize that we have an economy based on a commodity that is basically held hostage to all these different factors”.

Now, under normal market economics, we would expect that as the price for oil increases, people would simply move to alternatives. This would suggest a shift to renewable energy, biofuels, bioplastics, hybrid and electric cars, and so on. While this has happened to a very limited degree, we are so thoroughly invested in the petroleum based economy and its infrastructure, that it is going to take a gigantic effort to make the shift to the alternatives, and the oil prices just never seems high enough to spur this transition. Especially since high oil prices work to push our economy into recession which subsequently results in prices falling as demand slackens. It is a classic Catch 22.

But there are also other risks that we need to consider such as food prices that are intimately connected with oil prices. According to FAO data, we are now in a period of high and volatile food prices. The cost of food is influenced by population growth, changes in earning power and dietary patterns.  We are seeing the spread of the Western diet — more dairy and meat, more processed food, more convenience food and more luxury food.

When food prices go up, particularly in developing countries, we see social and political unrest along the lines of the Arab Spring, which in turn leads to higher oil prices because markets are terrified that the unrest could have a direct impact on oil supplies. This is a kind of event chain or problem loop.

So, should we just give up hope?

No, not at all. While the picture is fairly bleak, what we really need to do is move away from the idea that problems can be solved in isolation.

Roberts assures us that “[o]nce we acknowledge complexity, once we acknowledge the existence of these loops (problem>solution>new problem>), a new situation arises and it becomes possible to leverage complexity, and to interrupt this chain of events. But it requires an acute awareness of how that chain operates”.

We all know this, he argues. But when it comes to making investments, we don’t like to think about this level of complexity. We want a much simpler paradigm. In Roberts’ view we really have to embrace complexity moving forward from now on and as we try to tackle these new risks. Businesses have to be constantly adaptive.

He then gave two examples — polyculture farming in Japan and food miles/urban farms in the United States — of how embracing complexity can create new opportunities. Polyculture farming (i.e., using multiple crops in the same space) is an example of how it is possible to work the land more productively and feed a larger number of people. At the same time, the introduction of food miles and urban farming works to increase local food security and resilience while at the same time reducing the carbon footprint of our food. They both provide an opportunity to re-sort our food mix to increase the local component.

He concluded by stating that “The future is complex and you can either fight it, or profit from it”.

Not the end of business as usual, but a new beginning

Roberts’ presentation was very well received by the audience of international business leaders and members of European Business Council of Japan.

The remainder of the conference was composed of presentations by various businesses — Total Oil, Unilever and Sompo Japan Insurance talked about their corporate social responsibility activities. In addition, there was a fascinating presentation by Senator Taro Kono, member of the Japan House of Representatives with the opposition Liberal Democratic Party, on why Japan should abandon nuclear power and on the future of Japan as a nation. From 1997, he has continually expressed his concerns about Japan’s over reliance on the nuclear energy sector and opposes the construction of any new nuclear power plants. He presented a future energy scenario for Japan (based on the work of the Institute for Sustainable Energy Policies) that would see the country go 100 percent renewable by 2050.

There was also an insightful presentation from Luke Eginton, Managing Director of Vesta Wind Technology, on the myths about wind technology in Japan and how they have worked to hinder the rapid expansion of this power generation technology.  These myths are that:

• Japan is a mountainous country unsuitable for wind.
• Japan’s low wind speeds are unsuitable for wind power generation.
• Wind is unpredictable and poses a threat to grids.
• Japanese wind turbine generator makers understand Japanese wind best.
• Increasing renewables will increase electricity prices to unsustainable levels.

Eginton went on to convincingly challenge each of the above assumptions that continue to be believed by many influential people. He argued that the introduction of the new feed in tariff system for Japan on 1 July 2012 could mark the beginning of a new phase of renewables investment.

While Eginton’s presentation was very interesting, what we really need, in my view, is a comprehensive and objective assessment of the scale of investment required to take Japan to the 100 percent renewable energy future. There have been some studies by Institute for Sustainable Energy Policies, Greenpeace, WWF, the Ministry of Environment, and others, but their results are all over the place.

Rather we may need something along the lines of the work done by David MacKay for the UK and presented at TEDxWarwick. He presents all the energy options, describes the implications of each and then suggests that each one of us decides what would work best. Its a sustainable energy strategy without the hot air!

Other presentations at the Tokyo event were also very insightful and covered urban design, sustainable transport, smart and strong grid technology and the compact city.

It appeared that the presenters and members of the audience were still somewhat wedded to ‘business as usual’ while recognizing that we collectively face unprecedented challenges.

Overall, it appeared that the presenters and members of the audience were still somewhat wedded to “business as usual” while recognizing that we collectively face unprecedented challenges. The focus was very much on “moving forward incrementally” and it was suggested by Hans Dietmar Schwiesgut, EU Ambassador to Japan, that talking about the “end of business as usual” was perhaps not helpful and could give the wrong impression.

At the end of the conference, I had two thoughts running through my head. First, I felt like I had traveled back in time and that I had been observing a meeting taking place towards the end of the Edo Bakufu period of feudal Japan, in the 1860s. In front of me were all the Daimyo’s (contemporary business leaders representing the past powerful territorial lords) and they were discussing what Japan should do — modernize or not. The “end of business as they knew it” in 1860s Japan was the end of feudalism, the Meiji Restoration, and the beginning of industrial Japan. But sitting in the feudal world, it must have been difficult to imagine what the industrial world would mean.

Second, it is hard to imagine someone in 1860s Japan who might have believed that the country should modernize, or even someone in England at the start of the Industrial Revolution who believed that the feudal age was over, suggesting that we move forward with “incremental, small steps” as presented as the most practical way forward by one speaker. Indeed, a member of the audience did question whether “incremental change” was enough. To which the response from the speaker concerned was “we will see lots of small steps, and then some giant leaps”.

So what is the next giant leap then? And will humanity make it in time?

End of Business as We Know It is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License. The article was originally published in the Our World web magazine.