(Second of two parts)
This is a lightly edited version of the Acceptance Speech delivered by the author when he received “MAP Management Man of the Year” award on Nov. 23.
But the year 2020 has been a bizarre year for all of us. These last few months made what was unthinkable, tangible and real. We now live in a world that’s not merely complicated but tightly interrelated and complex. To use the words of the mathematician/meteorologist Edward Lorenz in the 1960s who asks, “Does the flap of a butterfly’s wings in Brazil set off a tornado in Texas?” The COVID-19 pandemic has driven this into our psyches mercilessly. It also exposed us to the raw power of exponential progression. A phrase used by Hemingway’s character Mike Campbell in his novel The Sun Also Rises, when asked how he went bankrupt replied: “two ways, gradually, then suddenly.” “Gradually, then suddenly” now applies to so many aspects of our lives: how we go to sleep, how the gradual onset of heart disease leads to a heart attack, how technology disrupts, how bankruptcies unfold, how pandemics spread, and pretty soon how climate change will affect us all, where we’re fast approaching the “suddenly” phase if we aren’t in it already. How will FPH (First Philippine Holdings) and the Lopez Group move forward in this unsettling new world?
I’ve felt for some years now that the unprecedented times we’re living in have been begging for a new narrative and a new paradigm for how we live, work, do business, and even how we measure success and progress.
Today our way of life has set us on a trajectory of 3 to 4 degrees C of warming by 2100. This current path will clearly be catastrophic and turn the Earth into an unlivable and socially disrupted planet way before then and surely within the lifetimes of our children. Whenever I see the United Nations Intergovernmental Panel on Climate Change (UN IPCC) timelines needed to keep global average temperature rise to 1.5 degrees C, when plotted on a chart it reveals a curve still just within reach, but, with each year of inaction, gets precipitously steeper and tougher to meet. These next 10 years (the decade of the 2020s) will determine whether we are able to halt the climate crisis in time, or watch it run away from us irreversibly.
We are not off to a good start. This year we saw record high temperatures in both the Antarctic and the Arctic, which both hold not only huge stores of ice but also tremendous amounts of methane in their permafrost layers. (For perspective: the Greenland ice sheet in the Arctic has 7.3 meters worth of sea level rise in them; Antarctica, the world’s ice locker, has 58 meters worth of potential sea level rise built in.) Methane, as you may know, is 80 times more potent than CO2 as a greenhouse gas over a 20-year period. If the big melt of permafrost results in these stores of methane being vented into the atmosphere, we would have unleashed a powerful feedback loop that’s equivalent to the emissions of another China today. The difference will be that no amount of climate negotiations can hold that back anymore. (If you don’t mind a sleepless and terrifying night, look up the National Geographic cover story for September 2019 which articulates in full color what’s happening up there in the Arctic.)
In October 2018, the UN IPCC was clamoring for us to cut CO2 emissions in half by 2030, and take it all the way down to Net Zero by 2050 if we want to limit global warming to 1.5 degrees C by 2100. That’s roughly a 6-7% annual reduction in carbon emissions till 2050. Just for perspective, this year travel and transport reductions and the economic slowdown from COVID-19 is expected to reduce carbon emissions by 7-8%. In other words, we need a COVID-scale crisis every year till 2050 just to keep the planet livable!
Today at just 1 degree C of warming, we can see the geologic-scale changes happening to our planet’s environment everywhere. I’m sure you remember the Australian and California wildfires, and the drought that reduced the mighty Victoria Falls and Zambezi River to a mere trickle last year.
Then just earlier this month, millions of Filipinos were sequentially pummeled and thrashed by Rolly, the world’s most powerful typhoon this year, and Ulysses, one that surpassed Typhoon Ondoy’s wrath in 2009. The destructive power of these formerly 100-year events has no doubt been intensified by the accelerating climate crisis, and they now hit us with greater frequency and regularity. The news images that swept our screens these last few weeks painfully called up two thoughts that are always simmering at the top of my mind. The first was what I heard Al Gore say in 2016 here in Manila where he warned that, “all our infrastructure was built for a world that’s now changed”. The second was a quote from Thomas Friedman of the New York Times who alerts us that, “with climate change there will be no such thing as herd immunity, just a relentless pounding of the herd.” How long can even the strongest, most resilient communities withstand this relentless and repeated pounding year after year if they can lose everything they have at least 20 times a year? Is this the kind of world that closes or widens the gaps between rich and poor? Do we sit around and wait for prayerful resilience of the vulnerable to turn into anger, then solidify into hate?
Our way of life and patterns of production and mass consumption now use 1.75 Earths annually. That’s 75% more than the Earth can replenish each year. US lifestyles account for five Earths yearly, which many others on the planet aspire to attain. All the main life support systems of our planet, from our oceans, forests, air, soils, biodiversity, and freshwater resources are all in decline. Plastics can be found everywhere from the bottom of the Marianas trench to the top of the Himalayas. Our own Pasig River is the 8th most plastic polluting river in the world. All other rivers on that top 10 list are thousands of kilometers long. Our Pasig river measures only 27 km.
Capitalism has brought tremendous and amazing progress, creativity, and innovation. But as it’s currently practiced, it has also left too many behind. Even as we breach much of our planet’s safe environmental limits, billions of people still do not have decent access to energy, clean drinking water, toilets, food, healthcare, education, housing, income and work, political voice, social and gender equity, or even peace and justice. Our economics 101 classes taught us the rainbow-shaped Simon Kuznets curve (done in the 1930s) which infers that inequality rises but eventually falls as the economy grows. There was even an environmental version of that curve by economists Grossman and Kreuger in the 1990s which promised the same relationship with environmental degradation and that eventually, pollution all got cleaned up as countries got richer. Theories like these shaped our worldviews and policies over many decades but we now know they have scant basis for being true. Economics in my time was taught with the inference that GDP can and should grow forever. The environment was belittlingly treated as just an “externality” that had no limits. We were trained like pilots who were taught to fly but never how to land. So, ironically, despite finally earning academic honors in my college economics courses at the University of Pennsylvania, I feel now like I have to unlearn a lot of it.
The populism that’s sweeping the world is a symptom of the growing disenchantment with business, politics, and life as usual. In today’s world, it’s a disenchantment that’s moving at exponential warp speed through the power of social media, weaponized or otherwise. The natural, social, and political forces being unleashed in the coming decade will likely make it the most challenging and most disruptive business has ever seen. The COVID-19 pandemic is just a mere “fire-drill” for what’s coming and demonstrates the scale at which things need to change. We are living in a time that calls for great paradigm shifts, and businesses that seek to thrive in this era must be able to reimagine and redesign themselves for this new world.
In this kind of a world, corporate sustainability that seeks to simply “tick the box” or do less harm is no longer good enough. Sustaining our trajectory today will result in disasters that are not only greater in scale, but also more unjust towards those without the capacity to cope with the devastating changes that are already here, and continue to escalate.
Businesses need to align themselves, their resources, and their capabilities towards a mission that seeks to elevate everything they touch — their customers, employees, suppliers, contractors, the environment, communities, and, of course, their investors. CSR or philanthropy may ease our consciences but the sad fact is they may never scale up enough to heal our hurting world in time. There is an urgency for all of us to go beyond incremental sustainability and transform into regenerative forces that align our profit engines with the need for a better, more just world and a safer planet. Collectively, we have the creativity and innovative energy needed to solve the world’s greatest problems. Unlocking these will be the foundation to some of the greatest business opportunities in the coming century. (Paul Polman, former chairman of Unilever, refers to the 17 UN Sustainable Development Goals as simply the world’s greatest business plan.)
Moving closer to home, this year we crystallized our Mission at FPH and our group of companies and that is: “To forge collaborative pathways for a decarbonized and regenerative future.” It’s a deliberately high bar and we’re nothing short of humbled by it. Let me share a few points about this short phrase. First, the mission was deliberated on and hotly debated internally for months and finally solidified our role in the transition to a decarbonized energy system. But it goes beyond energy and anticipates dealing with the many adaptive challenges needed to redesign how we live, work, and do business in a changed world.
Secondly, we didn’t feel it was appropriate anymore to use the word “sustainable” in a world that’s so badly in need of healing and renewal. So we took on the challenge of using the word “regenerative” instead, with all the responsibility it carries. We are not a full-on regenerative company today; no one is yet. But we chose it deliberately to signal to our people that they have a license to adopt this new mindset as our inherent way of doing business and that it’s OK for them to “bring their values to work” every day. Being regenerative doesn’t scale if it only comes from the top; it has to permeate the organization and how it does business day to day.
And thirdly, the word we used very deliberately was “collaborative” as we believe we cannot do this alone. We (that includes our PR and CSR professionals) all have to stop seeing this as a competitive beauty contest. I keep stressing to our people that if we find ourselves ahead and alone at the finish line, we will have failed in our mission. This is a massive undertaking and we know we cannot possibly succeed if we go the journey alone.
Honestly, these thoughts make me feel small and humbled. Because everything we’ve been doing so far just feels like a tiny first step on a dangerous thousand mile journey. We’re all imperfect beings, with imperfect abilities, in an imperfect, maybe broken world, but it should never mean losing the courage to make things better. As the songwriter and poet Leonard Cohen wrote:
Ring the bells that still can ring, Forget your perfect offering
There is a crack in everything, That’s how the light gets in
Let me close my remarks by saying that paradigm shifts of this scale and magnitude can never be easy, especially in the stage before there’s any momentum. But I take comfort in the transformation of a common caterpillar into something so functionally different and radically beautiful as a butterfly. Every caterpillar harbors dormant imaginal cells; each waiting with the potential to transform into something else. As cells morph, the immune system of the caterpillar attacks them as if they’re outsiders or enemies. But as the transformation persists and the number of imaginal cells multiply beyond a critical tipping point, the body stops fighting them, changes over and begins the process of nourishing those same cells instead. An unformed, embryonic wing may start out with just 50 cells but grow to as much as 50,000 when fully formed. The anguished and labored metamorphosis of a butterfly that can take to the sky in flight, only begins the moment it’s willing to give up being a caterpillar.
Once again let me thank the Management Association of the Philippines for honoring our journey with this award. It’s finally made sense of the times when we felt like the faint voice in the wilderness and our view of the world may not have been mainstream. Thankfully, the winds are changing profoundly now. But no matter where each of us are in this continuum of belief today, I feel with a mix of certainty and hope that we will all be helping each other along this same road very soon. We look forward to building those collaborative pathways with as many kindred spirits as we can.
Federico “Piki” R. Lopez is the Chair and CEO of First Philippine Holdings Corporation