WILL SUSTAINABLE MARKETS SCALE QUICKLY ENOUGH TO SAVE US?
By Robert Ludke, Skytop Contributing Author June 8, 2021
Over his career, Ludke has advised policymakers in the U.S. Senate and House of Representatives, taught at the United States International University in Nairobi, Kenya, and provided counsel on sustainability, environmental, social, and governance (ESG), and supply chain governance strategies for companies in the retail, oil and gas, transportation, and finance industries. Ludke also has experience navigating clients through high-profile crisis situations and mergers and acquisitions. He is the author of Transformative Markets, a book about the role of markets in fostering a more sustainable and prosperous society (published in April 2020 through the Creator Institute of Georgetown University), and the creator of the Voices of Nature podcast with Global Conservation Corps.
Ludke has worked on a series of mergers and acquisitions, with a particular focus on leading the communications and public affairs strategies for foreign transactions requiring a national security review by the U.S. government, including the largest outbound investment in the history of China. Ludke also led a number of crisis engagements and reputation-building campaigns, with work appearing in the Wall Street Journal, Forbes (cover), Bloomberg BusinessWeek (cover), New York Times, and CBS’ 60 Minutes.
Transformative Markets is my book about finding a way to address the indisputable facts that we are living in a way that is unsustainable, and we are running out of time to fix it. The premise is that the markets we use every day to purchase the goods and services we need is the only force powerful enough to transform how we function as a society into one that is sustainable. More innovation and a higher consumption of sustainable goods and services is best achieved through markets. We do not have a better, more viable economic model waiting to be deployed.
What I will explore in my next book is whether or not the multitude of up-and-coming markets for sustainable products can collectively scale to a level able to change the systems that tie together the $90 trillion global economy, thereby allowing our present needs to be met without jeopardizing and undervaluing our future.
Good Ideas Aren’t Scaling into Something Transformative
In recent years a plethora of exciting and innovative markets have emerged for products made with sustainability in mind: electric vehicles, solar and wind power, crops grown from regenerative farming practices, and moisture-wicking performance t-shirts made from recycled milk – just to name a few.
We do not lack for powerful ideas, game-changing technologies, passionate entrepreneurs, or cutting-edge innovations able to achieve a healthier, more prosperous world that lives within its means. Yet, this potentially powerful mix of ingredients has yet to scale into something able to dramatically improve our ability to achieve a sustainable future.
I believe these ingredients aren’t scaling is because we lack five things:
- An appreciation of the transformative potential of sustainable markets
- A commitment to invest in products and services that create long-term value
- A high degree of cross-sector collaboration in markets for sustainable products
- The political willpower to help facilitate nascent markets for sustainable products scaling into something much bigger
- The private sector willpower to boldly change business models in a way that fully embraces sustainable practices
As a result, we have yet to see a market for a single sustainable product grow to a level where it truly disrupts the market, sheds outdated and inefficient competitors, and gains a significant market share. A few markets are close – solar and wind power along with electric vehicles being the most prominent and promising. But none have truly solidified their market status.
The Greatest Tragedy of Our Time
At their core, markets are a reflection of us as a society and what we value. There is a human element to every market. Thomas Jefferson once remarked, “The government you elect is the government you deserve.” The same is true for markets. As Mariana Mazzucato, the founder and director of the University College of London’s Institute for Innovation and Public Purpose, wrote, “Markets are blind; they do not automatically tend towards the discovery or delivery of the public value.”
As a result, we only have ourselves to blame for rewarding markets that make things which are wasteful, inefficient, and come at a terrible societal cost.
The greatest tragedy of our time is that we value our present selves over our future selves. If we valued our future more than our present, we would not be consuming the planet’s resources at such a rate that our present selves require 1.6 planets just maintain our current – yet highly unequal – standard of living.
We have excessively – and to our detriment – built markets that produce goods and services with a short-term focus and that turn a blind eye toward the long-term consequences.
Why is the global market for power generated by coal – arguably the dirtiest, most pollutive source of energy in the history of mankind – still bigger than the market for renewable energy sources? Because we are not pushing the key actors in the energy market – namely policymakers, energy companies, investors, and consumers – hard enough to accelerate the shift from fossil fuel sources to renewables.
Why did it take so long for automakers to see the value in bringing electric vehicles to market instead of gas guzzling and polluting models? Because we did not demand with our voices and our checkbooks that auto companies offer a better alternative. It took a bold disrupter like Elon Musk to shake up the status quo and offer a compelling supply (Tesla Model 3) that changed the dynamic around demand (consumers wanting to buy electric vehicles that look and perform like high-priced luxury automobiles) before the auto industry started to shift how it designed, produced, and marketed vehicles.
The Virtuous Cycle of Sustainable Markets
The most fundamental reason markets for sustainable products have not scaled more quickly is because we do not appreciate the transformative power of these markets. By failing to appreciate the value creating potential of sustainable markets, we have not pushed hard enough for their wider adoption.
Consider that there were roughly 40,000 people employed in the U.S. coal industry at the end of 2020, yet there were 523,000 people employed in the U.S. renewable energy sector in 2020. It stands to reason if there had been a more cohesive policy in place for the U.S. economy to transition from fossil fuels to renewable energy, a significant number of workers laid off in the coal industry in recent years could have had an easier shift to jobs in the renewable energy sector. Because, as they are finding out in Europe, coal regions are ideally suited for large scale wind and solar installations. Which means the human disruption – while never easy or painless – can be more effectively managed than the fossil fuel industry wants us to believe.
Vertical farming is another relevant example. It is a system that is described as “growing crops in stacked layers, spaced 24 to 36 inches apart, with artificial lights and temperature controls.” While vertical farming never will fully replace large scale agriculture, it offers an opportunity to grow food without pesticides, avoid excessive fertilizer runoff into water sources, and emit far less pollution.
Equally important, vertical farming allows food to be produced in any community – dramatically shortening the supply chain and allowing opportunities for farmers (no matter where they live) to sell directly to local consumers. Yet, vertical farming is treated like a niche solution rather than what it is – a disruptive game-changer.
In short, sustainable markets allow for a “Virtuous Cycle” whereby an opportunity to transform leads to new ideas and new ways of innovating which, in turn, fosters new modes of production and value creation.
The Two “Big Questions” to be Explored
In future columns in this space, I will explore two “Big Questions”.
First, “Do markets for sustainable goods and services – none of which have achieved anything close to significant, lasting market share – have the ability to displace traditional markets in their sectors?”
For example, will electric vehicles gain significant market share over gasoline and diesel-powered vehicles? Will alternative energy sources emerge as dominant market actors at the expense of fossil fuels? Will new forms of agriculture replace the resource intense forms of farming that have been practiced for thousands of years?
The second “Big Question” to be examined is: “Will markets for sustainable goods and services scale to a level needed to achieve systems change?”
Systems change is a prerequisite for a sustainable future. It is a comprehensive reinvention across society of how virtually every product and service is designed, produced, marketed, and consumed. We cannot achieve a more sustainable, prosperous, and healthy future without systems change.
In order to answer those “Big Questions” I will be exploring a number of markets in depth and asking a number of related questions – and will greatly appreciate insights and feedback from each of you. I look forward to the dialogue and exchange of ideas!