Your Public Value opens a blog series on True Value with Lars Olesen, one of the 124 sustainability experts who took active part in co-creating the nine Public Value Principles© in 2020 and 2021. With this series, we listen to the multiple voices who offer perspectives on how to shape a better future. The experts we publish here have invested time and expertise in co-designing principles to help business transform itself. Finding a way to successfully bridge profit and public value would lead to true value! Being our first published voice in this series, the circular economy expert Lars Olesen tells us that profit, the root of our economic system, is indeed the problem to tackle. Read his piece, feel free to comment below, and enjoy your weekend!
“I follow a series of weekly newsletters from Sasja Beslik called ESG on a Sunday. This is kind of odd, as I’m a physicist and I have never really found any sincere interest in money and the financial system in general. Rather, I have categorised those subjects, including the fantasy of eternal economic growth, as kind of irrelevant and detached from the real world. Of course, I didn’t neglect the huge impact money has on all aspects of our societies, but I saw money as a value-exchanging mechanism – a simple transaction tool. How interesting could that be?
The Problem with Profit
That has changed dramatically during the last decade. Not because I suddenly find main-stream economic theory to be anything less bizarre than it has always been, but because I have realised how central our economic and financial system is in relation to all our major challenges. Be it climate change, deforestation, biodiversity loss, increasing inequality, water scarcity, pollution – you name it. In all cases you will find that the primary driver is located at the core of our economic and financial system.
Of course, this is no secret anymore and as a response a new category of investments have appeared on the investing scene. They go under different names like sustainable investments, green investments or the acronym ESG, which stands for Environmental, Social, and Governance. The purpose is to move investments from the bad apples, e.g. fossil fuel companies, to good companies that take the environment and the wellbeing of people into account and incorporate good governance into their business practices. If you have some kind of investments, like a pension scheme, you may have been offered to move your investments to ESG funds.
Change and ESG Funds
As a result, more and more investments are moved to ESG funds. You may consider this to be a positive indicator for the sustainable transition our societies have to accomplish in a very few years to avoid a disastrous future. Splendid you may think – change is happening – here we go!
Or, … maybe not so. Rather, here we stand still. The green, sustainable ESG investments apparently don’t move the needle on the issues they were supposed to have a positive impact on. If that spurs your interest I can highly recommend reading Sasja Beslik’s ESG on a Sunday, Week 40.
Why is that hardly surprising for a bystander watching the system from outside? Well, you can ask yourself the following two questions:
- Where does ESG come from?
- Where do our problems stem from?
The answers to these two questions have pretty big overlaps. It’s not the climate scientists laying out the scientific evidence, the indigenous people protecting the land, the biologists terrified by the biodiversity loss, the young people demonstrating in Fridays for Future, people being displaced by rising sea levels, or just the average outdoor person loving to be in nature who have fostered neither ESG nor the extreme-profit seeking and climate-wrecking economic circus we have today.
The real problem is that those in power – fund managers, investors, economists, CEOs, CFOs, banks, and puppet politicians – have created a system that simply CAN’T change. The entire system is built around profit as the only thing that matters – that’s the backbone of the system. Take profit away and you take away the entire system. Irrespective of the nice intentions behind ESG, profit is always governing the circus – that’s the name of the game. Everything else is just a nice add-on if the profit is acceptable – otherwise it’s irrelevant. So all the system can do is to pretend that it cares. Isn’t that exactly what ESG is all about when you look below the surface? And that means that ESG is effectively just another smokescreen, another delay tactic – intended or not.
Upton Sinclair put it pretty elegantly:
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” Upton Sinclair
My own take is that the economic and financial system is rotten to the bone and ESG is not going to change that.
Where to Find True Value?
How do we move forward from here? First we have to realise that almost all profitable investments, with very very few exceptions, rely on externalities that are not paid for – or put in another way – they rely on free destruction of our commons: A stable climate, clean air, a non-polluted environment and so forth. On top of that you can often add that profitable investments rely on exploitation of resources and a cheap workforce.
Just think about that for a moment. Our commons belong to all living species on this planet, and they are destroyed and taken away from you, me, and everybody – including your children and all plants and wildlife – just for the sake of somebody’s profit. We can’t continue to allow that to happen!
A Do-No-Harm Policy
The only way to tame and redirect the system to favour investments that commit no harm – or even better investments that work to regenerate what has already been lost – is to make it extremely expensive to destroy and exploit. A high CO2 tax is just one example of that. It should ultimately become so expensive that it’s impossible to make a profit if you commit harm in any way.
Such a change is not coming from the system itself as it has way too many vested interests in the status quo. The change has to be forced upon the system by governments around the world. Unfortunately, governments have proven not to be very proactive unless they feel the pressure of citizens. That means you and me!
In this process we will have to reinvent and relearn what true value is. And it’s NOT some virtual bits in a computer system that are created by banks out of nothing. True value will be extremely hard to get if you only multiply what you already have more than enough.
No, what I’m talking about is real world value.”
Lars Olesen, Your Public Value Ambassador, 2021-10-11
PS: Don’t stop divesting from fossil fuels – we have to leave them in the ground.