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How to transform your business on a journey to a new economy
In this episode of the Sustainability Matters podcast, speakers explore how the New Economy Unit at the EY organization can inspire businesses toward a regenerative economy.
Related topics
With the world in the midst of a global polycrisis, the New Economy Unit (NEU) — a global research group at the EY organization — was established to look at the key economic forces at play and the leading business practices needed to create a sustainable future.
Host Bruno Sarda discusses the NEU and a bigger idea of regenerative business transformation it represents with Matt Bell, EY Global Leader, Climate Change and Sustainability Services, and Anastasia Roussou, EY Head of New Economy Research Unit, in London.
Moreover, the discussion covers the work the NEU does with the activist and academic community, some of whom sit on the NEU advisory board. It also highlights the importance of taking a long-term view while not neglecting short-term objectives, and teases what the NEU will be exploring next.
Please read the full report “A new economy - Exploring the root causes of the polycrisis and the principles to unlock a sustainable future”.
Key takeaways:
- The New Economy Unit enables practitioners to think about the long-term future and what they need to radically change.
- The report aims to bring everyone on the same page and mainstream the concepts that will likely aid the transition to long-term sustainability.
You can also listen to this podcast on Apple, Spotify and Libsyn.
For your convenience, full text transcript of this podcast is also available.
Anastasia Roussou
There's a lot of positive trends that we can draw on and feed and accelerate, and that is what we call the New Economy. And that is an economy that has human and planetary flourishing as interlinked objectives at its heart.Matt Bell
Perhaps we won't all be car owners in the future, but we'll have access to different modes of mobility and different mechanisms to do that in a way that gets a lot more from the same resource. This is about getting what we need in society from what we have access to without going beyond that every single year as we do at the moment.Bruno Sarda
Hello and welcome to the EY Sustainability Matters podcast, our regular look at ESG and sustainability topics, and how they impact businesses around the globe. I'm Bruno Sarda, EY America's leader for Climate Change and Sustainability Services, and your host for this series. And today, we have a special episode recorded in person and also on video in EY offices in London where I am this week, where our guests today will be discussing the work of the New Economy Unit, or NEU, a global research group at EY, and their insightful report describing the regenerative principles and best business practices needed to unlock a sustainable future.Today, we stand at a crossroads where the need for a new economic paradigm to tackle the global polycrises is more evident than ever. And during this episode, we aim to talk more about the root causes of the current so-called polycrisis economy, discuss the principles that can steer us toward a sustainable future and examine the role of the key economic forces in this critical transformation, and understand what role governments, businesses and other stakeholders can play. So, as we explore the impact of policy, technology, citizens, finance and business, we find that these forces can either reinforce the decline of our current system or become the driving force behind the necessary economic transformation.
So, to guide us toward a regenerative economy, the New Economy Unit highlights five key principles: sufficiency, circularity, systems thinking, redefining value, and equity and justice. Unfortunately, most business models today are far from being aligned with the principles of a new, regenerative economy, yet a growing number of companies are also recognizing their role in achieving this transformation and understand that navigating inevitable disruption and maintaining relevance in a radically different future is essential to avoid being left behind.
Collaboration is one of the key components of the thriving new economy, and this is why we’re recording this in London this week. A group of experts came together as the NEU’s advisory council to talk about the priorities of the New Economy Unit and how they can encourage more businesses to steer toward a regenerative economy. If you’ve not already read the New Economy report, I highly recommend it and hopefully.
Our discussion today will inspire you to do so. But for now, I’m glad to introduce our guests on this podcast — Matt Bell, Global leader for Climate Change and Sustainability Services, and Anastasia Roussou, Head of our New Economy Research Unit. Welcome to you both.
Roussou
Thank you.Bell
Thanks, Bruno.Sarda
So, Matt, maybe I'll start with you, as the leader of our group, can you explain the importance behind establishing this New Economy Unit? And what were the economic or societal shifts that really made you think this was timely and important to do so?Bell
Yeah, thanks, Bruno. It's actually a really interesting time for us. In many ways, for those of us that have been working in some form of sustainability over the last two plus decades, we've been dreaming for where we are today to have occurred: sustainability being in the zeitgeist, almost difficult to have a conversation with any board or senior leader in a company today without sustainability being a core topic that they want to bring up.And yet, despite that, I had a real concern, particularly coming out of the COVID-19 crisis, that if we started to only think about sustainability in the context of meeting near-term challenges and addressing some of the fundamental flaws that we see, say, in reporting obligations or compliance activity, that we might lose the wood for the trees. And so, for our team, and we have the biggest sustainability professional group in the world, I wanted to ensure that we were also continuing to look at what was on the horizon.
So, for me, the New Economy Unit does two things: firstly, it allows our practitioners to bring themselves away from the near-term sustainability challenges that people are dealing with, to think about the future that we're going to have to deal with and what would need to radically change to get there, so that we aren't driving incrementalism in a world that's running out of time.
Sarda
Yeah, that's terrific. Ana, to go to you, you know this inaugural milestone report that was recently published by the group you lead, the NEU, “A new economy exploring the root causes of the polycrisis and the principles to unlock a sustainable future.” So, lots of new words, maybe, for some people, but the report sets the tone for this transformative critical work that's ahead.And it's not only, I think, actually a monumental research piece, but also I think profound, maybe to Matt's point, on this more kind of deeper, philosophical, social and humanistic level, really describing kind of a future state that we really want to aspire to. So, I know it's a challenging task because it's a big piece of work, but maybe can you summarize the report for our listeners who may not have yet had a chance to read it and explain why they should?
Roussou
Yeah, thanks Bruno. So, like Matt said, we're looking at the Unit to look at the long-term and systemic aspects of sustainability. And so, to start off, we're called the New Economy Unit, we had to define what we mean by a new economy. So, this report is a foundational paper, it sets the vision. And I also want to be very clear that this is a synthesis report.So, we have drawn on a rich tapestry of knowledge that others over decades, a multitude of researchers and initiatives have been working on in the new economy. And we have organized that in a way that we think brings together the key messages and makes them accessible to our key audience, which is businesses.
So, we've done that with big respect and appreciation to those researchers. Now, the report is focusing on the challenges that we're facing today and how to get out of them and the principles to unlock that regenerative future, like you mentioned in your introduction. And it does that by starting to look at the problem, and the problem is that we're facing a multitude of crises. So, we know that we're not doing enough to address climate change.
The best case that we're looking at based on current commitments is 2.5C degrees by century and, instead of the Paris 1.5C degrees. We know we have lost a huge amount of biodiversity, and we're on track to lose a lot more. We know that we are in vast decline across the ecological space. We've breached six out of nine planetary boundaries that hold the stability of the earth together. We know that, on the social side, we're facing a recession.
We see an increase in mental health conditions, a polarization of a size that we haven't seen before, and an increase in inequality across most economies. And on the geoeconomic front, whether it is resource competition or conflict, or mass migration, we're seeing a multitude of crises that are really adding complexity to that. And these three clusters are interacting, reinforcing and they're forming what we call the polycrisis in the title of the report. And everybody, of course, is aware of this because we hear so much about it. And we want do everything to resolve it, but we can't seem to make progress. So, sustainability is falling short of what is needed the pace and scale. And the reason we assert in the paper for that is that we just look at the crises, we don't look at the bigger picture.
And so, we identify six root causes, six systemic barriers that are holding us behind. And those we call unsustainable growth, so valuing the quantity over the quality of growth and in that making trade-offs with the environment, we are not focusing on key wellbeing factors or even deepening inequality, because we don't look at the distribution of that growth. We look at the linearness of our economy, so we have tripled extraction of raw materials, and we have tripled waste because we use most things, 90% of materials are only used once. And so we have a “take-make-waste” approach. We look at over- consumption, so that's the third root cause. So, we consume far more than the planet can regenerate.
And we do so particularly in the wealthier parts of society, which means that the under-consuming parts cannot get their fair share. We look at financial capital myopia. So, if it doesn't have a monetary value on it, the externalities as we call them, we can't seem to account for them in decision-making and we can't seem to introduce them into how we set strategy in the business and investment space. We look at short term-ism, so where the structural policy cycles, business cycles, but also cognitive, how we as people in our minds perceive creeping crisis. These are things that are holding us behind from looking at the long term of sustainability. And lastly, siloed, the siloed waste we look at issues so, both in terms of even looking at climate change as a single issue when everything is systemic or working on them — so working in siloes.
So, these six things enact as lenses through the five economic forces you mentioned in your introduction. So, policy, technology, business, citizens and finance. And they hold us back from making the changes that we need, but we also identify an alternative which is still possible. And there's a lot of positive trends that we can draw on and feed and accelerate, and that is what we call the new economy. And that is an economy that has human and planetary flourishing as interlinked objectives at its heart. And to get there we say let's supplant these six root causes with five guiding principles, and those principles stand in direct opposition.
So, the first one is the principle of sufficiency. So, enough for everybody to live a good life within the limits of the planet. And how do we do that? We do that by focusing on needs rather than wants, focusing on substitution, focusing on avoiding consumption, so that we can increase elsewhere, and changing basically mind sets, but also creating choice. We look at circularity, so aligning with natural flows and that requires making things that last - making things that cycle, either regeneratively or by materials and making core sufficiency, so, focusing more on services rather than products. We look at systems thinking, so like, we talked about having siloes, not looking at things in isolation, but the systemic nature of these issues and also actors that can work on them. We look at value redefined, so thinking within planetary boundaries and applying that to accounting and governance.
And lastly, equity and justice and how do we start to being more distributive by design, how do we start to be more participatory in how we make decisions? And again, those five forces, we point to various positive trends that we can harness in order to further accelerate. And we start to ask questions of business that can get them thinking about these things in their own context. So, if our audience is interested in a report that brings all these things together then asks some of the fundamental questions and that gets the conversation started, then they should definitely have a read.
Sarda
Well, I want to read the report again. No, I mean, it brings together so many, both how did we get here but also where we need to go. So, maybe Matt, as we do this work, right, and as we think about doing all the short-term work that, it's still important but also guides us toward this more regenerative economy. As Ana mentions, you know, there's these five key principles and yet, to your point, the research shows that some of these long-term goals are sometimes left siloed in pursuit of these more near-termed rewards, short-term financial gains.So, Matt, maybe from your perspective, what do you think needs to be done to more effectively communicate the importance of these principles and what can we then in the work we do as sustainability professionals, as you mentioned, we've thousands of them around the world working with every sector, of every economy, what can we do to show how crucial these are to the prosperity of the planet and translate them into business action?
Bell
Yeah. Well, we didn't produce the report with a specific audience in mind, but I think it applies to a number of people who I'm hoping will be able to take something from it in their day-to-day roles. I mean, hopefully, in thinking through both the conditions of a polycrisis and the principles that would get us out of those, it does contrast some of the activities that we carry out today and the incentives that are driving poorer behaviors over good. Some of those are systemic issues that have occurred over decades.I mean, we've got some post-war economics, like a focus of GDP over anything else, that has undermined, I think, a lot of the investments that we should be seeing in restoring the natural economy because, as you said, we need to redefine value. And so, for me, what we're really hoping for is the stakeholders are going to be able to use this a little bit as an anchor in their own minds of whether or not decision-making that they are taking today is consistent with a longer-term view.
Now, that doesn't mean that we don't need to suddenly address short-term risks and issues that we face, or that businesses or governments aren't going to have to deal with nearer-term issues as they occur. I mean, I think that's the day-to-day world, but what we're saying in this report is that that can't be at the expense of the longer term, because to the Rockstrom review around the planetary limits, if we're breaching six of those nine, we reach critical tipping points of which we actually can't recover those.
Now, it's really important because when we start to think about the recovery of those tipping points, if we are carrying out certain core activities, be that just a primary focus on the delivery of a short-term objective around profitability, which we know will be at the expense of long-term gain, even potentially for that organization that's achieving that, or if we're thinking about a focus on growing an economy for a government which is at the expense of the society that that government is ultimately responsible for — those things are actually in direct contravention of one another.
And so, what I really hope is that any stakeholder, whether that's the consulting community at large, sustainability professionals who often, of course, are our peers in the marketplace, trying to drive this within the commercial space, they take from this, hopefully some core principles that they themselves can start to reflect on their decision-making.
Roussou
And like you say, Matt, actually, one of the core reasons why we wrote this report is we want to bring everyone on the same page and bring everyone along and start to mainstream some of those concepts that are not necessarily mainstream right now in terms of how do we make those transitions, so start to speak the same language, I guess in terms of long-term sustainability.Sarda
Yeah, and actually if we can maybe double click on that Ana, we talk about this kind of transitioning from the old to the new, knowing that in many cases, we don't have to invent these things, they exist in some form somewhere. Are you seeing examples in some parts of these various systems or economies that can illustrate this transition?Roussou
Yeah and it’s actually a good way to also plug the fact that we're writing another paper now that looks at that in more detail, but I'll talk to the new economy re-review first of all. So, within the paper, we identify both trends that point toward worrying signs that we are locking ourselves into polycrisis in the long term, but we also identify positive signals. And we do that across the five economic forces that we mentioned.And this is either policymakers being interested in exploring alternative models, so wellbeing economies or post-growth economics, and looking at what are the pathways that can unlock the transformation, technology, being a key to unlock a lot of the things that we need, whether it's in renewable energy, regenerative technologies or even the digitalization of trade. We're looking at finance. Despite rocky waters lately, finance has come a long way in the last six or seven years and sustainable finance has emerged as a huge category. And we're seeing a lot or progress there too. We talk about citizens and the rise of movements.
Litigation is becoming very very important, and consumer choice is also starting to lean toward wanting to transition to something different. And most importantly, lastly, I guess as a unit that operates within a business-oriented organization, we're looking at the positive signals we're seeing from business.
And while we recognize that, particularly for large established businesses, the transformation we're talking about is huge and very challenging, we're also identifying that in small pockets, within those businesses, progress is happening whether it is in the scale of these technologies, in the rise of renewable technologies to dominate electricity system,in the growth of the sharing economy or the service economy, the digitalization of products and services, but also new models coming up from more grass-root initiatives. So, new business models coming to challenge them, and that is what we dive into in a bit more detail in the paper that we recently published.
Bell
Can I just say, Ana? I think it's really important, when we talk about some of these principles, it can be read as though we are advocating to move toward a world of major constraint on peoples’ choice on what you have access to. And I think it's important to show that that's not what we're seeking to do. What we're trying to show is that all of the evidence suggests if we continue on the path that we are, that is what will happen because we will have a radical change to the biological world around us that limits the amount of access we have to the kind of expectations we have today in society, but what Ana is saying in the report that we show is that actually, there's a number of consumer trends and preferences that we're starting to see already occurring, and businesses and new technologies that’re enabling them, where it's actually the preference of people and it meets for some of those new principles too.The sharing economy, the services economy which is changing the way in which people move from an ownership model that we would have expected when we were younger, Bruno, that the new generation don't. Perhaps we won't all be car owners in the future, but we'll have access to different modes of mobility and different mechanisms to do that in a way that gets a lot more from the same resource. This is about getting what we need in society from what we have access to without going beyond that every single year, as we do at the moment.
Sarda
Yeah, for sure and I think you both touched on this idea that these systems we have, at the end of the day, are the results of constructs and ultimately decisions that various groups and people make. And the stakeholders, I think you mentioned some of them, so governments, businesses, we have NGOs, regulators, finance, all have to play a vital role either in further entrenching us in the system that we think doesn't have a sustainable future, or to move us in the direction of these new paradigms. Matt, you spent a lot of time talking to many of our clients and different actors in the economy, what are you seeing in terms of where involvement seems to be making a positive difference?Bell
Yeah. Involvement in the context of those stakeholders engaging in some of these principles?Sarda
Uh huh.Bell
I mean, we're still seeing point examples. I mean, Ana and the team are currently working on a new report which you alluded to, which gives some of these examples of organizations that are driving those guiding principles out today. It is fair to say that we can't identify a single company on earth that is living completely within planetary limits.Sarda
Right.Bell
All businesses have some depletive element to them today, but yet, we can find these key examples. For all of the stakeholders who engage those throughout the consumptive lifecycle of any one business model though, I think it's important to try and understand what the requirements are, what's driving them, what KPIs they're driven by, and interestingly, at the moment, Bruno, we're going through a radical transformation in the compliance marketplace around disclosures.So, here in Europe, we are seeing possibly the largest transformation we've ever seen in corporate sustainability disclosures through the CSRD. But similarly with the ISSB's changes to reporting disclosures, we're also seeing other countries think this through. And in both cases, there's an obligation for pretty extensive stakeholder engagement to understand what is most important from a sustainability context.
Now, in Europe, that's two-fold. So, what are the sustainability issues that can have a financial material impact to the organization, but what is it around that organization’s business model that has an externality to it, and impact that also needs to be managed. And so, I think you're right, it's the intersect between those material topics to long-term sustainability and the key stakeholders who are impacted by them or who can impact on them that's most important.
Sarda
Right. And we mentioned at the beginning that part of the reason we're here is the convening of an external advisory council for the New Economy Unit. Can you say more maybe about the why and what value does it bring and how can it help us scale the work of the NEU?Bell
Sure, I'll start, but maybe Ana, you've got some comments too. I mean, firstly, it was important to us to have an external advisory council because it is quite easy within all communities, even including the sustainability community, to become an echo chamber. And so, we needed to make sure that we had people who represented different stakeholder groups globally, had international experience, represented both developing and emerging economies who could really start to challenge us on some of the outputs from our research, so that was the first.The second was though that we have a wealth of knowledge, Ana reflected on this, right? It was a synthesis report, the first report we produced because there has been decades of research, actually, around many of the principles we're talking about. And we definitely did not want to make the case that this is primary work that EY teams have uncovered, but the mainstreaming of that becomes important.
And in order for us to continue to drive that forward and do things in a really meaningful way, we need an external voice helping us to shape what they think is most important too. So, for those two reasons, we wanted to have an advisory council. And I can say they were both inspiring and challenging in equal measure.
Sarda
For sure.Roussou
And I guess I'll add to that. So, this week, we had our quarterly meeting with them, our first meeting to speak about strategy and forward plan. So, we had them all here together in London. And we had a really rich discussion around the potential for impact around the role of our organization, and reaching internal and external audiences. It's just really fascinating to hear from people that have been in the sustainability space for a very long time, doing very different things.And I think we can share who we have in the council. So, we have Jonathon Porritt who's been a pre-eminent pillar, I guess, of the corporate sustainability regenerative space. And also in policy, we have Izabella Teixeira who is a former environment minister for Brazil and a key player the deforestation space, but also a key player in the lead up to the Paris Agreement. Usha Rao-Monari, who I know you know, Bruno, and has come from a practitioner background with a really strong background in advising companies across different sectors, but also in finance and the environmental space.
And lastly, we have Tim Jackson who is an authority in the post -growth economic space and broader academia. So, having these people that come from very, very different backgrounds and bring very diverse knowledge that can hold us to account first of all, but also lend us their insights and their direction in terms of where we can go with the unit is really fascinating. And it's really helping us set a direction for the future.
Sarda
Yeah, definitely will echo both the inspiring and the challenging dimensions of the conversation. And one of the principles we talked about is this concept of applicability or do-ability in that this isn't meant to be a solution framework, but it should feel like it inspires action, so maybe, Ana, as you produced this work, as you maybe tell us a bit more about the work that's coming:,what is your hope in terms of how does this arm and, or inspire, sustainability professionals either within our own teams or in the organizations we work with and their own hierarchy, if you will, from maybe the CSO to the CEO, how does this help them have better conversations about their long-term decisions?Roussou
Yeah. So, I'll say as well thinking about your previous question on the positive signals too. This is one of the most positive signals that we've had coming out of this. We launched this paper without really knowing how it was going to land, whether it was going to go really great or draw criticism. And we had a really good reaction, not just from initiatives that are working in this space that are smaller or more specific, but we also had really good reactions from large companies. I've had a lot of people that have reached out from the finance space or different sectors, as well as big consultancies.And so, this indicates that there's a community of people, even if as a whole, the business world is not where it needs to be by any means at the moment, within the business world and not just in the sustainability space, there's a community of people that are really intrigued and interested in exploring those concepts that really understand and wants to put those across. I think that the primary ambition is to get people to talk more in these terms, to start asking some of the bigger questions, but of course, we have to get more practical too.
So, we have recently published a paper that is focusing on the business angle. So, what does a business look like in the new economy. And it looks at the application of the five new economy principles across different areas. It looks at fundamental, structural issues, like purpose, strategy, the governance and ownership model. It looks at how we collaborate within the value network — how we work with customers and how we look at people. And it starts to not only articulate the North Star, but also provide some examples of businesses that are bringing these elements to life in different ways in their own organization and helps to prove that while it's very far from business as usual, it's not only possible to put sustainability at the heart of things, but it's possible to do that and be a successful business as well.
Sarda
Yeah, that's terrific. So, I know you've kind of teased the what's next for the NEU and we'll provide more information in the link, in terms of how to access what we've already published, but what other research are you focusing on now?Roussou
Yeah. So, as I mentioned, having this published this paper, we're currently working on the next step of this. So, we're looking at a deeper, I guess, into the structural challenges that are standing in the way of businesses moving forward. So, the suite of research that we're exploring now dives deeper into the operational structural elements of the business model across and we're engaging with their various businesses around., how can we start to explore these things a little bit more practically. So, hopefully, we'll have something very interesting to share in the next few months.Sarda
Well, thank you both. I think it's both insightful and inspiring conversation. I know it can be easy to feel dis-empowered by all the things that feel like they're hard and where momentum isn't always moving in the right direction, but I think it's important to know the future we want. I think this work gives it a new language and feels actionable. It gives, to your point, signals and examples of where this is going, so thank you both for this really insightful conversation.And for all of you, if you have thoughts to share or questions on the content of the report or anything else coming out of the New Economy Research Unit, you can actually reach out to the team directly at neweconomyunit@uk.ey.com.
And we'll also put that email in the episode description. So, as I said at the beginning of the episode, this is the Sustainability Matters podcast, you can find all past episodes of the show on ey.com or wherever you get your podcasts and thanks for listening. If you enjoyed this episode of Sustainability Matters, we'd love for you to subscribe. Ratings, reviews, comments are also very welcome. We invite you to listen to past episodes that you may have missed, like our July episode where we heard the inspiring story of the Island nation of Palau at the forefront of the battle against climate change. Our August episode was dedicated to the topic of sustainable innovations in the food chain and how even a little step in this direction can yield accumulative and encouraging results.
So, please also visit ey.com, where you'll find a wide range of related and interesting articles that will help put these bigger topics in the context of your business priorities. I look forward to welcoming you on the next episode of Sustainability Matters. My name is Bruno Sarda, you can find me on LinkedIn and feel free to connect with me there. Thanks so much for listening.