In a situation where totally new ways of delivering on human needs exist and many companies are trying to move from a product to a service perspective, a narrow product assessment is not enough.
By asking what system a product is part of when it delivers on human needs, the impact in relation to human needs can be established. People paying, directly or through taxes, for something is also where the ultimate willingness to pay exists. This willingness by people to pay for something is what many companies, investors and policy makers fail to identify. Instead, they tend to look at competitors in the same sectors. We see this limited perspective constantly repeating. From historic cases, like typewriter manufacturers failing to see the rise of computers with word processing, and Kodak failing to move beyond old films into the digital age, to current cases where car manufacturers fail to move beyond physical mobility, and steel/cement producers fail to move beyond a narrow product perspective by only focusing on “green” versions of current offerings, we see companies disconnected from what people need.
Few models for sustainability and innovation address the systems needed to deliver on human needs, but a growing number do. The researchers behind IPCCs most sustainable pathways and consumption-based work have done work to assess changes needed to transform systems, others with focus on how both social and environmental goals have begun to develop frameworks, and with partners, Mission Innovation have developed concrete tools that link solutions to human needs. With much work ongoing, the quality and quantity of models and data with focus on systems delivering on human needs will rapidly increase, but already today enough exists for action.
For many companies it is still a significant challenge to establish units of service for human needs, as they might be far down the value chain, e.g. providing lubricants or tires to machines that belong to companies that they do not know anything about. And if they know what that company produces, they might not know how that material/product is used in society.
As highlighted in the case of the car company lacking knowledge about its products’ impact on human needs, a step 2 assessment can be still be done by using generic data, such as the use of their vehicles in society.
For companies making generic and multifunctional products, such as steel, plastic, lubricants, nails, etc. assessments can be done based on statistics. For example, if a company sells a special steel then the different uses of that steel should be assessed. While the exact proportions of the use might not be available until greater transparency in the value chains exists, data is often available that can help provide information about the proportion that will be used in oil platforms, SUVs and land mines, and how much will be used for wind turbines, refrigerators and energy efficient buildings.
If the company currently lacks any knowledge about their impact on human needs, they can use a level 2 assessment to categorise different “systems of use” within three groups.
Group 1: Systems of use that are part of unsustainable systems that need to be phased out.
Group 2: Systems of use that are sustainable and should grow.
Group 3: Systems of use with multiple, or unclear, contributions, where many of the impacts can be a mix of positive and negative impacts.
The above approach can be used by many enablers that support many different companies and sectors, such as digital service consultants, management consultants and legal firms.
With a dynamic approach to avoided emissions, rather than a carbon snapshot that only assesses the avoided, or additional, emissions in the current situation, the company can also use the step 2 assessment to discuss future strategies to move towards areas where they contribute to sustainability. Instead of the climate risk innovation that dominates today, the four-step approach to a full climate assessment explores how business models can evolve and new solutions develop.
Current use of KPIs are based on a situation with slow and incremental changes where sector experts only compare companies within the same sector. From the perspective of investors, a company without knowledge of how it contributes to delivering on human needs should be considered a significant risk in a rapidly changing economy. With new ways of providing for different human needs rapidly emerging, knowledge about end-customers and how the company meets their needs is necessary. Investors and policy makers, together with companies and especially start-ups, should therefore explore ways to support increased transparency regarding the company’s contribution to human needs and how sustainable it is.
A shift in focus to the system delivering on human needs also makes it clear that efficiency losses over the value chain must be part of the assessment, e.g. in clusters delivering nutrition more than 50% of the protein is sometimes lost in the process of delivering an actual value, i.e. delivering healthy nutrition. In addition, such an assessment also allows for over-consumption assessments. In both cases it is not just the traditional agricultural sector, but also those promoting everything from certain menus, and sizes and designs of storage of food, to health experts promoting different diets, and lobby firms that try to shift focus from unhealthy diets to only exercising.
As the Obesity Health Alliance have stated:
“At best, junk food brands tying themselves to exercise is a deeply cynical attempt at market protectionism. At worst, it’s spending massive amounts of money to profit from rotting teeth, childhood diabetes and human misery.”
In fast fashion many products are discarded due to lack of interest or changing fashions, something that many of the companies selling the products contribute to with their design and marketing. In a time of climate crisis, the fast fashion companies, through aggressive marketing, managed to double clothing consumption from 2000 to 2014 in the rich countries that already had large wardrobes. The number of garments purchased per capita between 2000 and 2014 increased by about 60 percent as a result of aggressive marketing. One major contribution (negative sustainability impact and positive short term profit impact) was their success in changing the view of clothing as consumers keep clothing items about half as long as they did 15 years ago. As even McKinsey, a company who together with many management consultants have supported this development, note: “Some estimates suggest that consumers treat the lowest-priced garments as nearly disposable, discarding them after just seven or eight wears.” With the current focus on scope 1-3 emissions and circular business models such companies can avoid a discussion about their responsibility for lifestyles and the size and impact on a wardrobe level.
As Jemima Kelly from the FT noted:
“If H&M really want to move towards a sustainable future, they kind of have to not exist. Or not in their current form, anyway. Clothing that is designed to be worn only a handful of times cannot be truly called “sustainable”, no matter how many times the material it’s made from has been recycled, or how little pesticide has been used on the cotton.”
Instead of only looking at individual products a step 2 assessment provides an insight to how sustainable the company is from a system perspective. Assessments on this level also allow for rethinking how a service can be provided that delivers on human needs, something that the assessment at step 3 focuses on.