A New Normal – Keynote delivered at the SWITCH Asia Networking Meeting

This is a transcript of the Keynote I delivered at the SWITCH Asia Networking Meeting on 15 November 2012. It is a fictitious look back at a sustainable development scenario as seen from 2030.

“It is with both great pleasure and even greater humility that I stand here before you this afternoon.

The pleasure is to share with you my learnings from the last 20 years. The humility is to represent Druk Holding & Investments to receive the 2030 Nobel Prize for New Economics, the first time the prize has gone to a company rather than an individual.

Thank you.

I want to start by acknowledging two groups of individuals without which DHI’s combination of commercial success, consumer engagement and sustainable innovation would have been impossible to achieve.

First, our employees, now more than half a million strong in 17 countries, whose involvement in every stage of redefining our strategy has been crucial. Second, our customers who have been so important in helping us shift to our model of “shared value”. Using crowd-sourcing to unlock our customers’ ideas as innovators and mobilise their engagement as citizens has been vital to our success.

I would like to tell you a story; a journey that I have witnessed and had the privilege to be part of. Nearly 20 years ago, I thought I was going to the Kingdom of Bhutan for a year. At the time I was overjoyed with the challenge of linking Gross National Happiness and Business. Picture crisp cobalt skies, the smell of blue pine, golden hills and snow capped peaks in the distance…

Upon arriving in September 2012, I was confronted with the realities of making change happen in any dynamic environment. Not all my experience was a romantic sustainability dream in an isolated Kingdom trapped in time. There were many challenges to overcome when I first arrived:

  • The country was poor, with 23 % of the population living under the poverty line, accelerating youth unemployment, and an urban drift challenge.
  • There was a general lack of trust in capitalism, and a complete absence of the concept of stakeholder engagement or Shared Value
  • While GNH was a popular concept in 2012, there was a very real gap between the philosophy and its implementation on the ground
  • With a new democracy finding its feet, policies were often reactive and prescriptive rather than enabling
  • Innovation was often greeted with hostility and failure of policies and businesses was seen as failure, rather than the first step of an iterative process towards success.

So with these impressions from my first few months in the Bhutan, I still was hopeful, but I never thought that I would standing be here before you nearly 20 years later to deliver this speech!

At the time, the global standard growth model saw the ever-increasing consumption of goods as the end goal. That model was needlessly wasteful of natural resources, mispricing scarce resources and failing to capture the huge efficiency gains available both along and across the entire value chain. It was a model that, in the end, could provide neither the long-term growth that we needed as businesses, nor the long-term prosperity we needed as global citizens.

In short, it was unsustainable.

What are the changes we’ve seen between 2012 and 2030? There are so many it is difficult to know where to start… Three major levels of change or decoupling:

  1. Changes in the way products are made and consumed. Shift to an open source, circular economy: after Bhutan became the first organic country in the world in 2015, the bar was set much higher, aiming to be the first circular economy by 2035.
  2. Changes in the way citizens perceive value and the way they consume: introduction of television in 1999 and Internet in 2001. It could have been a slippery slope…
  3. Changes in the macroeconomic model: Bhutan had a head start in this department. Starting in 1972, the Druk Gyalpo or Dragon King Jigme Singye Wangchuk recognised that GDP was, by itself, not sufficient to measure the health of a society.

What are some of the specific changes we have seen in the region?

  • The largest company in the world in terms of employees in 2012 was Wal-Mart, with over 2 million. After Wal-Mart dissolved in 2018 to become a franchise operation with a series of locally owned stores, AMUL Dairy Cooperative in India became the largest company the most “employees” in the world by expanding into Bangladesh, New Zealand and China.
  • The world’s largest chill-train infrastructure with efficient refrigerated rail network was implemented in India between 2015-2020, plunging food waste in India by 72%.
  • The idea of employee ownership has spread. The biggest change was probably when the most valuable company in the world in 2012, Apple, was bought out by China’s Foxconn in 2015 and was delisted to become the largest employee owned company in the world. Unsurprisingly, it’s biggest market is now China, a market for which it crowd sources ideas
  • Myanmar has managed to successfully attract foreign investment to efficiently tap into its rich fossil fuel resources, and has set up a permanent fund modeled after Norway’s and has a value of $220 billion.

Those are the big headlines, but the little headlines of what has been happening on the ground are perhaps more significant.

  • Since 2016, there have been more phones than people in Asia. Coverage is not only universal, but free for the first 30 minutes per month. In a ruling by the UN world court in 2019, mobile access is a universal human right, along with access to water, food and shelter.
  • Following a microfinance scandal in Bangladesh that brought Grammeen to its knees in 2012, a revival of a more transparent micro- and meso-finance Industry brought access to finance across Asia. Bank accounts enabled by mobile technology are now universal, with penetration rates above 98% in every SAARC and ASEAN country.
  • Enabled by access to finance and information technology, the presence of cooperatives has blossomed, spurred by Hindustan Unilever’s decision to source 50% of it’s raw materials from employee owned cooperatives by 2020.
  • Across the region SWITCH Asia ended up has over 1500 projects, and the SWITCH Asia Virtual Conference has become one of the largest in the region. Last year’s virtual riverboat tour was a highlight of new social technology, bringing together nearly 4,000 people.
  • Once the crowd funding element really took off and as the SWITCH Starter platform achieved scale, the EU participation shifted from grant making to project-based loans with profit sharing.

Changes in Bhutan:

  • In 2006, Bhutan wrote into their constitution the importance of environmental protection and conservation, including a clause that requires the country to maintain 60% forest cover forever.
  • Many thought that this would not be possible, but with active engagement of local rural populations and adoption of advanced silviculture policies, Bhutan managed to make a transition from a conservation based strategy which kept people out of the forests to a program of mixed use forestry practices which invited the people into the forests as stewards
  • As mentioned, in 2015, the country became the first completely organic country by promoting pasture-based mixed stock permaculture. It also vastly improved yields and became a net exporter of food, something that many thought would not be possible at all.
  • Bhutan also became the first country to be completely carbon neutral, and is on its way to be the first net carbon sink. By preserving its forests, exporting run-of-river hydroelectricity, and switching its urban transport to and electric infrastructure, Bhutan was able to largely shift away from fossil fuels.
  • Energy and resource efficiency also played a key role, enabled by cross learning from Nepal and Sri Lanka as part of the SWITCH Asia program.

 

Changes to Druk Holdings & Investments:

The confluence of environmental and economic crisis which the region was still experiencing in 2012 spurred us to rethink our businesses and, in the process, to develop and capture new markets.

By 2015 we were able to shift from public enterprise to a radical privatization in a shared ownership model.

By committing to long-term economic, environmental and social sustainability across all our business lines, we were part of the shift from a world of resource consumption to a world of value optimisation.

DHI was instrumental in leading the way for two major changes in how our industry and, by association, the global economy operates today .

First, with our Waste Partners programme, we revolutionised the way we worked with players through our entire value chain to eliminate the concept of waste. As a result, today’s consumers take a world without waste for granted: operating a low-carbon, closed loop value chain with efficient resource use and collective stewardship across life cycles is part of businesses’ licence to operate.

Our efforts at DHI to find ways to reduce our material footprint were small to start, but became larger and larger as we extended them to our SME suppliers, and later other companies started to imitate us. We realised that, by facing what were essentially systemic challenges, we were also creating massive opportunities. As an industry, we began to innovate ways to deliver the “smart” prosperity we are familiar with today, driving towards a circular economy.

In 2012, we transformed the Waste Partners programme from a closed supply chain system to an open-source platform that our consumers could join – not only could they feel more secure about their purchasing decisions by knowing exactly what waste we were producing in which countries, they could advise us on material choice and help us make connections to other businesses that turned our excess material into a valuable input elsewhere. As more and more stakeholders, including our competitors, joined the programme, the bottom-up wave essentially forced policy-makers to provide the right incentives to allow true valuation of all materials and externalities.

If sustainability started off as the creed of efficient resource management, it has ended up helping us build a new economy which values resources and products differently. This is at the heart of DHI’s second key contribution to today’s economy – our True Value for Money movement, which started almost accidentally as a campaign launched in 2016.

Through this movement, we worked with our customer base to rethink the value proposition of the goods and services we provide, essentially changing the way people consume across our society. As a result, today we produce nothing more than is required to enhance and improve consumer lifestyles and well-being.

Key milestones the acquisition of Air BnB in 2015 and the startup of electric car sharing programmes first in Bhutan in 2017 and later in India in 2020.

While we have not yet managed to convert all our product ranges into dematerialised services and experiences, we have certainly managed to get across the message that we are no longer extracting, transforming or selling “stuff”; we are enhancing people’s well-being overall.

Sustainability to us has therefore been a catalyst for innovation, not just in terms of the facilities and technologies but also innovation in defining what value means to the economy and how it can be delivered. In doing so, DHI has helped unlock significant financial rewards.

And while those rewards have spurred fierce competition within the industry, new forms of collaboration have been a key in ensuring that we race to the top. Open source architectures make it easy to share non-competitive information across entire value chains, and we have developed targeted industrial ecosystems that combine competitive advantage with benefits to our wider community and society. We have also put the consumer at the core of the collaborative process to help us design more high-impact, high-value consumer experiences that can profitably fulfil needs and aspirations without costs to the global commons.

But the roots of our success, as I see it, are wider still. DHI, like many of our competitors, has invested boldly in thousands of small, experimental initiatives, models and promising technologies that we felt could transform our businesses. This investment was enabled by the SWITCH Starter platform. Together we constructed new languages and metrics to communicate more clearly with our boards and external investors, and we have found patient capital to suit our long-term commitments.

We have been open about what has worked and what has not, since we knew the journey was about learning as well as succeeding. We have accepted that every CEO should be judged on his or her contribution to the firm’s entire stakeholder group, with the environment and development as critical components. And we have been surprised along the way by some of the advantages of embracing an agenda for sustainable consumption – we benefit from greater levels of employee and customer loyalty than any other large holding company.

This evolution of DHI and the private sector has in part been enabled by changes at a macroeconomic level:

Bhutan now ranks #7 on the Sustainable Competitiveness Index of the World Economic Forum. This index, first tested in 2011, eventually replaced the Global Competitiveness Report in 2015. This high ranking was in part enabled by DHI’s strategy, a value doubly returned in a virtuous cycle.

Meanwhile, open government and crowd sourcing of policies in Bhutan have enabled more enabling environment for business and citizens

 

How did all this come about?

In fact Bhutan was able to learn a lot from the advanced policies and practices of many South Asian countries. It was, so to speak, able to stand on the shoulders of giants.

  • Thailand’s macroeconomic strategy of a Sufficient Economy
  • Bangladesh – Micro-enterprise, gender empowerment and BOP engagement
  • India – IT infrastructure and skills training
  • China – Invested 10% of its GDP in infrastructure. The China Dream

What were the enablers that allowed this learning and overcoming of these challenges?

  • Knowledge and transparency – good governance and reporting by both private and public sectors
  • Trust & Engagement – Open Source solutions, starting with public-private round table dialogues, and later enabled by technology
  • Acknowledgement of the importance of strong values, organisational behaviour and Human issues, rather than technical solutions and mechanics
  • Focus on living, not buying – Collaborative consumption and the sharing economy
  • Recognition that every culture is different, mass customisation applied to models of sustainable consumption as well as products.

Together, we have helped build “a new normal” for the world economy. And while smarter regulations from governments and incentives for sustainable investing have been essential to us achieving our goals, we are proud that it has been business, in partnership with consumers, investors and other stakeholders, which has both led the change and embodied the change to a more sustainable and successful path for the economy as a whole.

Finally, I want to point out that, despite the fears that many had in 2012, all this has been achieved without sacrificing established lifestyles, while bringing nearly all of the world’s 8 billion consumers online in all global markets, the very markets where many of DHI most innovative ideas were produced.

Sustainable Consumption and Production has truly offered an integrated approach to achieve overall development plans. it has reduced economic, social and environmental costs, strengthened economic competitiveness and certainly reduced poverty.

We have seen:

  • Changes in the way products are made and consumed. Shift to an open source, closed loop circular economy…
  • Changes in the way citizens perceive value and the way they consume with the mass customisation enabling the China Dream, the Bhutan Dream, the India Dream…
  • Changes in the macroeconomic model: Although it took a few years from the first proposal in 2012, Gross National Happiness has been adopted for implementation by the United Nations, and several countries including Brazil, Mongolia and Myanmar have stopped reporting GDP figures in favour of this more balanced approach.

 

It is an amazing honour to accept this prize on behalf of Druk Holding & Investments. It is almost  ironic that, while shifting global perceptions of waste, value and growth, we were merely doing our best to innovate our way to success in a fragmented and competitive market in a tumultuous landscape.

It is even better to celebrate this success knowing that the model we pioneered on the shoulders of so many partners and stakeholders has been accepted, adopted and often improved, reaching the lives of almost every citizen on the planet right now, without compromising the lives of future generations to come.

Do not ever be afraid of you inspiration, and always believe that you can have a positive impact. Dame Anita Roddick, who founded the Body Shop almost 50 years ago, used to say, “If you ever think that you are too small to have an impact, try going o bed with a mosquito in the room.”

Bhutan started off as that mosquito, and now is recognised as the roaring Thunder Dragon it was meant to be.

Thank you.”

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