Michael Lenox and Tate Moeller discuss “creative destruction” as a way to communicate the opportunities created by sustainability.
Tate Moeller (00:10):
A lot of industries right now are on a complete hiring freeze, or it has to be approved by their CEO if they’re going to bring anyone on. So when we’re talking about job creation, a lot of industries right now are just worried about that bottom line during the pandemic. So when someone brings up sustainable change and that comes to the table, is there any kind of incentive right now, or how do you make kind of the C suite aware that now that this opportunity exists?
Michael Lenox (00:36):
I’m a trained as an economist. And the way we often think about these things is this idea that businesses create negative externalities, things like pollution, and a lot of what sustainability is, is how do you incentivize and how do you get businesses to reduce those negative externalities? There’s a lot of truth to that kind of mental model of how we think about business and its relationship to the environment. What I’m arguing is maybe a slightly different viewpoint. It’s the one, again, founded on this idea of creative destruction. It’s a term used by Joseph Shumpert or famous Austrian economists, this idea that what’s a hallmark of capitalist economies, is the ability to invent new. And so an alternative perspective on sustainability is to think about not these negative externalities, but think about the market opportunities for companies to create new technologies and businesses and business models that create value, for customers, for society, by developing more sustainable technologies. If you look at something like renewable energy or electric vehicles, these are becoming popular in part because they make market sense. In many instances, renewable energy now is the cheapest form of electricity available. You see the success of Tesla, but others as well, there’s part of this that’s being driven by consumers desire for sustainable technologies. But a lot of it just being driven by these are new, good technologies that deliver value to customers and therefore finding themselves being adopted. So when I think about the opportunity for businesses, if you think about it in terms of how can you create forward-looking new, innovative technologies that deliver value for your customers and other stakeholders, that should be what you’re thinking about all the time. And so this should be an opportunity that you should have even in a tight economic environment that we’re facing. It’s interesting to know, by the way that from an entrepreneurship standpoint, it’s often during these economic crises that we actually see a lot of the kind of future growth companies being created, going back to the “.com bust” and the rise of companies like Facebook. It is often the case that when we have these economic downturns, you start to see some of these ventures getting formed. This is an opportunity as much as anything for businesses to create new, generate more jobs, and continue to grow their businesses.
Lenox is the Tayloe Murphy Professor of Business Administration, Senior Associate Dean, and Chief Strategy Officer at the University of Virginia Darden School of Business.
Moeller is the Director of Sustainability Solutions at Minneapolis-based 2DegreesCooler™.