Green Fix
Welcome to the Green Fix, the climate & sustainability podcast for Australian corporations and their ESG practitioners. We explore the top challenges and opportunities in the industry, how they are impacting your business and your work, so that you can keep your sanity.
Green Fix
S2 E5: A New Era of Business, Innovation, and Governance, with David Ireland, The Growth Drivers
In this episode of The Green Fix, Dr. David Ireland discusses the intersection of sustainability, innovation, and governance. He defines wicked problems, particularly climate change, and emphasises the importance of horizon scanning for organisations. David highlights the transformative role of AI in sustainability and the need for businesses to adopt innovative practices. He also addresses the challenges boards face in governance and the impact of mandatory climate reporting. The conversation concludes with insights on how sustainability practitioners can effectively communicate risks and opportunities to leadership teams.
David's Recommendation to our listeners:
Nexus: A Brief History of Information Networks from the Stone Age to AI
by Yuval Noah Harari
Your Hosts:
Dan Leverington
Loreto Gutierrez
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It's the quintessential wicked problem. Global, it spans economic, environmental, social domains. It demands innovation at scale. Climate change takes no notice of our country borders. It takes no notice of our politics, our social hierarchies. You've got all these different competing tensions around trying to build a business and return on investments from shareholders, which forces short-termism versus building something that's sustainable and looking after and nourishing the environment that all businesses in life depend on.
Speaker 2:Welcome to the Green Fix, the climate and sustainability podcast for Australian corporations and their ESG practitioners. We explore the top challenges and opportunities in the industry and how it impacts your business and your work, so that you can keep your sanity. I'm your host, loretta Gutierrez.
Speaker 3:And I'm Dan Leverington. Today we're in conversation with Dr David Ireland. David is a venture capital partner, board director and innovation strategist with a 20-year track record of scaling disruptive technologies to global markets. As a venture partner at Significant Capital Ventures, investment committee member for UniQuest and the managing director of the innovation advisory business TGD, david has helped launch and fund breakthrough startups in deep tech, ai and sustainability. He is a seasoned board leader with prior executive roles at CSIRO and ThinkPlace. A Fulbright Fellow and former chair of the Australian Government's Horizons Scanning Committee, david has co-founded multiple ventures, delivered hundreds of millions of dollars in investment and driven systems-level change in R&D commercialisation. He brings deep insight into how emerging technologies can transform industries and what it takes to lead that change. Dr David Ireland, welcome to the Green Fix.
Speaker 1:Thanks, Dan. Thanks Loretta, Lovely to be here.
Speaker 3:We really enjoy sharing with our listener, at the top of each conversation, how our guests contribute to the world of sustainability. How do you describe what you do?
Speaker 1:Yeah, look, it's not a simple answer because I seem to have a bit of a portfolio mix of activities these days, but essentially what I do, I help people translate their ideas for whatever type of impact they're trying to have, into products or services that can go on and have that impact. I often find that I'm helping people or organizations bridge the gap between emerging technology, innovation and sustainability. My role is essentially to spot what's coming up next whether it's new technologies or market trends or shifts in regulations and guide people and organizations on how to strategically position themselves to benefit commercially and sustainably, and sometimes this involves doing investments in new technologies and startups. Sometimes it's helping other businesses scale disruptive technologies or sustainability practices, or it's on advising boards on how best to integrate those types of practices into their strategy. It's a real mix these days and gives me an opportunity to play with lots of different technologies and people across lots of different sectors.
Speaker 2:Amazing. In this episode we are going to talk a lot about being a director, about governance. We wanted to start with a topic that's really key to organizations, especially when they're starting to prepare their boards to be future ready, and that topic is innovation In your position on the Horizon Scanning Committee, your investments in startups and the scaling of your own startups. Your career has required you to know what's happening around the corner from the present, and all whilst dealing with wicked problems. How do you define a wicked problem?
Speaker 1:I suspect people have written PhDs on defining a wicked problem, so in the time we've got, wicked problem is a problem that is fundamentally really complex and it's really interconnected, and by that I mean it's connected to lots of other problems and it's often without a single or clear solution. Good examples of problems like climate change or social inequality or even things like pandemics. They're dynamic, they're evolving and they involve lots of different stakeholders with lots of competing interests. I'm attracted to trying to work on and solve these problems because if you do, you can have massive impact on society or on the planet. Right, these are not the low-hanging fruit problems that people are often focusing their minds and attentions on, but also, working on these problems forces you to think really creatively and to collaborate across different sectors and disciplines. These problems don't sit within our traditional definitions of sectors and disciplines.
Speaker 1:You mentioned horizon scanning, so that's a tool that I think is a really powerful tool that organizations, and probably boards in particular, should be using, because it helps you, as the name suggests, think about what's coming up on the horizon.
Speaker 1:And what's coming up on the horizon could be new technologies, it could be new big market opportunities or challenges, new competitors, or it could be new policies or changing consumer preferences, whatever it might be.
Speaker 1:Having an idea about what might be coming up and having processes for scanning those is critical to making sure that as a business or an organization, or even as a hopeful entrepreneur, you have to understand those ingredients so that you can start to try to bake a solution into how you position yourselves to deal with whatever that new trend might be. I see more and more organizations doing it and I think partly organizations are just waking up to the reality that there is so much change coming faster and faster at us these days, and whether it's through changes in technologies or whether it's because the fundamentals of the world in which we're operating in is changing really quickly More storms, more heat waves, more cold waves, whatever you want to think about. Being able to peer into the future and have some strategies or some thoughts about what do we do if this one happens is really important to long-term sustainability.
Speaker 3:You see climate change fitting into those conditions of a wicked problem that you just outlined.
Speaker 1:It's the quintessential wicked problem. It's global. It spans economic, environmental, social domains. It demands innovation at scale. Climate change takes no notice of our country borders. It takes no notice of our politics, our social hierarchies. You've got all these different competing tensions around trying to build a business and return on investments from shareholders, which forces short-termism versus building something that's sustainable and looking after and nourishing the environment that all businesses in life depend on. As an example, take the transition towards renewable energy in Australia. That's not just a technology challenge that's facing. We got the technologies for generating lots and lots of solar and storing lots and lots of energy. We got the technologies for highly efficient distribution across distances of energy. We got the technologies for demand loading. All of that exists, but it requires investment, it requires new policies, it requires thinking about the social equity of how we deploy these technologies and these interventions and needs us to think about global geopolitics. When Putin started dropping bombs in the Ukraine, it sent gas prices and oil prices around the world into crazy territories. That had massive challenges here in Australia For businesses that are thinking about how do we address climate change or how do we pursue a path that's more sustainable some of the challenges they are needing to do that in a market that maybe, if they decide to do that, that might put them into a short-term disadvantage against competitors because they might need to make some investments that maybe pay out in the long term but are detrimental to shareholder return in the short term.
Speaker 1:When we've got shareholders who are still demanding quarter-on-quarter growth or good quarterly dividends, that's a really hard thing for directors to do. One of the key mindsets as a society that we need to engender is one where we start to move away from short-termism to thinking and being able to account for long-term value generation through accounting practices, but also just through general recognition that we rely on the earth for our businesses. It can't just be about having good short-term dividends, but also there's another one around. We've got to move away from zero-sum mentalities to one where we look for and we put in the effort to create win-win solutions as well for us and the planet.
Speaker 3:Absolutely. I remember when Paul Polman first joined Unilever, one of the first things he did was say to shareholders we're not giving you quarterly updates anymore, and obviously that's a relatively rare example of a company with the scale to be able to do that. It certainly can be done In terms of the sustainability professional. What are some of the signals that you believe they should be keeping an eye out for when they are doing these horizon scanning activities? That should be feeding into the way that they're speaking to the business from a strategic and tactical position?
Speaker 1:I think it's a mix. You're looking for signals like, in a lot of things, a single signal on its own, a little blip that there's a new technology, or there's a little blip that somebody has spoken about a new policy. In and of itself might be interesting, but you'll wait that differently than if you start seeing that across lots of different channels. Part of the challenge is how do you get enough puts coming through for you to be able to have some waiting against. We keep hearing something about AI coming up. Maybe we need to have a think about how AI might have an impact on our cost of goods. Organizations need to think about how do we weight the signals that are coming through to us.
Speaker 1:You also need to be a bit conscious around when you're trying to set up your systems for doing horizon scanning is be really conscious about your own biases around what you think might be important, and so be open to looking at different input sources but also pushing yourself to not just focus on the things that you think. We have this tendency as humans, that confirmation bias. We just go and look for signals that confirm what we think the future is going to look like and then we build strategies for that and when the future, inevitably, is different to what we thought it is going to be, we're like, oh, how did that happen? It's like, well, of course it's different. So push yourselves and make sure that you're talking to the people that you're not always talking to and you're looking in the places that you're not always looking for the signals that you need to be aware of, because that's probably the source of the most insightful stuff for you.
Speaker 2:I'm really glad that you race AI, because it has been very topical throughout our first season of our podcast. We can't really talk to innovation, we can't really talk about business without talking about AI. How do you see the advancements of AI impacting the future of sustainability, in particular, for Australian businesses?
Speaker 1:Every single day I read something or I see something or I use AI in a way that I didn't think was possible yesterday. It's developing so quickly and it is going to have such a massive, transformative effect on all aspects of our lives, I believe, and sustainability is no sustainability, and how AI plays it's enabling more precise monitoring, predictive analytics, optimization. There's AI companies out there around the world now it's certainly in Australia that are helping farmers manage their land more sustainably. All of a sudden, you're able to make sense of these huge amounts of satellite data on weather patterns and reports on soil density and carbon concentrations and whatever else it might be to help farmers make better real-time decisions around productivity and soil health. We haven't necessarily been limited in the last decade by data to make decisions. We've been limited by our ability to synthesize and make sense of that data.
Speaker 1:Ai, all of a sudden helps us make sense of, and do predictive analysis of, huge amounts of data. That should hopefully enable us to make better informed decisions about what we're trying to do. We can start inputting information from satellites and sensor networks and consumer behaviors and we can start looking for cause and effects, causal loops, whatever it is that you want to look at. That's super, super exciting. Also, the power of AI. We need to recognize that there is a responsibility for us to use ai really sensibly. It requires huge amounts of energy. Somebody told me six months ago that every time you type in a basic query into chat gpt, it's the same energy that you use if you turn the kettle on, which is actually really significant.
Speaker 1:we all run dozens of chat, gpt, really basic queries, if not really complex queries, every single day, and it's the same as basically having our kettle running all day long when you think about it in those terms. You know energy is one of those things that we don't see. We use it without really understanding or comprehending the impact of the usage. I tell my kids, you know, you wouldn't walk out of the bathroom or the kitchen with the tap running because you can see the water pouring out of it and you can appreciate that it's a waste of resource. But we do it every single day. When we walk out of a room with the light on right, it's the same photons are just falling out of the ceiling but you don't notice it. Recognizing that we need to make sure that we're not just using it to generate new TikTok videos and we really need to use the technology to solve some of those really complex problems that we're stuck with, those wicked problems that we spoke earlier about.
Speaker 3:We interviewed Dan Illich a couple of weeks ago and we were talking to him about John Howard when he was speaking about energy efficiencies. He used to speak about don't fill the kettle up more than you need and within 30 years we're at the point where every prompt is basically boiling a pot of kettle a crazy mark in time of just over a quarter of a decade.
Speaker 1:You think about it, where we've got these AI agents that are potentially replacing people, and every time they do a task, it's dozens and dozens of queries and searches. The energy usage is astronomical. So we need to make sure that we're using it to help solve some of these foundational problems, because otherwise we're just making the foundational problems much, much worse. It doesn't matter how good the TikTok videos are, if the planet's burning.
Speaker 2:Just on that. One interesting conversation that arises from the deployment of AI is that of how humans are going to interact with it, how they're going to use it and the massive issue that we are facing, which is the replacement of jobs. As we're gaining more insights and we're using AI more, how do you think individuals and organizations can position themselves so that they benefit from the innovation and they benefit from the knowledge and they ensure that they're not getting left behind?
Speaker 1:A couple of thoughts come to mind, loretta. I hear a lot of people talking about needing to go off and do courses you know how to use ChatGPT or whatever else it might be.
Speaker 1:I typically caution people against going off and doing coursework on some of these new technologies because they are evolving so quickly. You could spend your couple of thousand bucks on doing an AI course and six months later it could be irrelevant what you learned. One of the things that organizations need to get better at, particularly in Australia, is we need to get better at finding ways to try new technologies within the business in a way that's risk appropriate and part of that's cultural, and being willing to put some money onto a new technology, run an experiment. Does it do what we think it might do in terms of helping us be more efficient or productive or impactful? Manage the risk in a way that's appropriate for the business, but at least give ourselves a chance for people to try it, to see if they can use it, and for the business to make an informed decision around. Do we want to do this or not?
Speaker 1:In Australia, we have often lacked that innovation imperative. There hasn't been a real push for us to be really innovative. We generate lots and lots of great ideas in our research communities in Australia. Where we really fall down is in the adoption and the deployment of technologies in our businesses, coming up with lots of new technologies. That's just not in the DNA and it shouldn't be of many businesses, but every business needs to be thinking about how do they adopt and deploy technologies. We all need to do better than that. There's cultural and process around risk, appropriateness and adoption and just giving people an opportunity to play with stuff. You'll learn so much more about generative AI by playing with it than what you will by going off and doing an online course.
Speaker 3:It's such a fascinating point. One of the key aspects of Australian culture in the 90s was the idea of cultural cringe. Kylie had to go to the UK to get famous Silverchair had to go overseas, natalie Imbruglia. We've always had this need for our artists to be loved by the world before we really adopt them, and it's fascinating to see that it's similar in the business community as well. Larry Marshall, the former head of CSIRO, spoke at Climate Action Week, sydney last year. He said in 21, csiro was ranked above NASA in terms of global innovation rank. Was ranked above NASA in terms of global innovation rank, but we are awful at commercializing that innovation. Where do you think we're doing well with this commercialization of innovation?
Speaker 1:Like you said, we are doing well in the generation of ideas. In our research community in particular, we got lots of people coming up with lots of new knowledge. We don't do well in the commercialization. We don't do well in the adoption and the deployment of it. There are new programs, whether it's the big government's breakthrough Victoria that's spending a lot of money trying to invest in new startup technologies. There's CSIRO Larry Marshall when he was running CSIRO they set up a program called ON, and ON has taught 3,000, 4,000, 5,000 researchers that process of knowledge translation into impact and it's a really impactful program.
Speaker 1:There are things out there that are trying to address some of this gap or this inability that we seem to have to do lots of translation For things like sustainability. It's even harder in Australia in comparison to if you're coming up with a new software the time to money into things like real estate that understand the return on investments. I'm going to get there. Maybe I could justify and convince myself to put money into some IT business and I get a chance to get my money back in a couple of years. But am I really going to put it into this social enterprise that's trying to help communities address some sustainability challenges. I don't really understand it, so I'm just not going to do it. We are lacking some of those financial mechanisms and some of the investors that have got the experience to do that as well.
Speaker 1:But just on the point, I read the other day that something like only 11% of Australia's manufacturing businesses use any form of AI. In a world that is so quickly evolving, 11% is a remarkably low and concerning number. And it's not just that these people should be coming up with AI, that they can sell and do new things. It's that adoption of technology to make their processes more efficient, to drop their cost of goods, so that they can be more competitive on a global market.
Speaker 1:For a lot of businesses in Australia, what they are finding and what they will continue to find, that it's not just about how do we become more competitive on a global market anymore. It's going to be about how do we even survive anymore If we don't start adopting these new technologies. It's not that I'll just be able to keep doing what I've always done. It's like, no, you won't. You won't be around in two years if you keep doing what you've always done. This has stopped being a choice If you want to build a business that is sustainable and I don't necessarily mean in an environmental way, I mean, will it be around for more than 12, 24 months then you are going to have to start thinking about new technologies that you can adopt and deploy across your business.
Speaker 3:Tom Friedman wrote an article in the New York Times about his trip that he took to China, and one of the sites they took him to is what they call dark factories, where they don't even have to turn on the lights because it's 100% automated, right.
Speaker 1:That wicked problem that we spoke about before. People don't lean into that stuff because it's a bit hard. But the people who have leaned in and used automation or use smart technologies, they can often deliver products and services that are sustainable and they can do it at a price point that's lower. It's hard, but just because it's hard doesn't mean you shouldn't do it, and if you do do it you can build some amazing competitive advantages that will build you a business that is sustainable.
Speaker 2:David, I want to pay the conversation now to governance. You're a very accomplished director yourself, and you have recently highlighted a couple of topics like AI, climate and cyber being one of the most critical areas for boards to be prepared for and that are currently, in your opinion, not quite there. So why do you think that boards are so often behind the curve on these complex issues, which are also so interconnected?
Speaker 1:It's often they lag because traditionally they're really risk averse and they're structured to handle linear, predictable problems. It's not to say they couldn't be otherwise, but when you think about who they're answering to, people are telling them put my superannuation into you, don't stuff it up. I need your dividends because that's what I'm relying on. That drives a risk-averse, linear problem to how we do business and, like we said, AI, climate, cyber threats. These are wicked problems and they're exponentially interconnected. Whatever it might be, we actually can't address those with linear thinking and we can't address those with really traditional risk-averse mindsets linear thinking and we can't address those with really traditional risk-averse mindsets. We need boards with education around these new technologies. We need boards with education around how do you run experiments. We need boards with the culture to be able to reach out and work across disciplines and across sectors, to think about longer-term sustainability issues and with agile thinking, so that they can start to manage some of these challenges. They do need to be able to create spaces to try new things, to have an organization that has enough innovation maturity to not want to punish people who try new things in a way that's risk reward is managed really well.
Speaker 1:That's where a lot of business in Australia have traditionally struggled relative to some of their counterparts in the US in particular, but certainly parts of Europe.
Speaker 1:We've had these conversations around the innovation imperative in Australia for a long time, but we just haven't had strong enough drivers of change to embed innovation, embed adoption of new technologies and practices into our businesses.
Speaker 1:Those drivers of change just haven't been there. We are running out of time for it to be a choice. A lot of businesses you know if you want to do it, you have to do it, Otherwise you're not going to be around in a couple of years and thankfully there's a growing recognition and a waking up in a lot of consumers around needing to be a bit more conscious about this stuff. There are a few things about the younger generations that give me cause for concern, but there are a lot of things about the younger generations that give me a lot of cause for optimism. They are a lot more conscious of who they buy their products and services from in terms of the practices and the behaviors of those businesses, and we will see a gradual increase in pressure on the consumer side on these businesses to just be better at thinking about sustainability practices but also what technologies they use and how they deploy those technologies as well.
Speaker 3:That's a good point. If you look at the makeup of a lot of boards, generally people on the boards have backgrounds in accounting and from the legal profession. Both of those professions are highly exposed to disruption from AI. As this is the traditional pathway towards becoming a director in Australia, what impact do you foresee this having on the future makeup of some of the largest companies boards in the country?
Speaker 1:Yeah, it'd even be a question around for a lot of the legal issues that boards will be dealing with or the accounting issues. There might even be an AI machine that is able to do the vast majority of what boards need in terms of real-time advice in a board discussion around. What might we be needing to think about or what are some of the legal risks that we need to be aware of? We're probably a little bit away from giving over that type of control to AI agents yet, particularly at a board level, but certainly AI is going to be a really useful tool for helping people like me who aren't legal professions or accounting experts to be more aware of and understand some of the accounting and the legal risks that, as board directors, we might be exposing ourselves and our businesses to.
Speaker 1:The other thing that's important with this is often when we're thinking about new technologies, we're thinking about the tech bros who design the technologies right, but particularly with technologies like generative AI, where it's becoming apparent that it's the social sciences, it's the anthropologists, who are super important in understanding how to write really good prompts and how to get the best out of those technologies. It's those types of people who are best at understanding what's the impact of these technologies on social inequalities and how they're utilized and deployed, and hope we are able to bring in new types of people onto boards who are really non-traditional board roles, like anthropologists, but those people actually have a lot of the skills that we need to make sure that the technologies are being used in a way that are good and are net positive for society as well.
Speaker 2:Thanks for that, david. One topic that, as you can imagine, has been very top of mind for this podcast, given that we are focused on corporate sustainability, is the changes that were implemented as of July 1st, where large enterprises with more than 500 employees across Australia are now required to provide mandatory climate reporting to the Australian government. Group one is live now, and group two and group three will be online for the next two years. So how do you foresee these particular new reporting requirements impacting boards in Australia?
Speaker 1:My general tendency is not necessarily to be a big fan of mandatory reporting from government, but in this instance it's a really important move and it's a really significant shift for those big organizations for compliance around proactive management of climate risks Companies like BHP Rio. They've already embedded climate risk into strategy and it will set a precedent for others as this trickles down to other businesses. The hope is that we'll see changes in behavior. That old mantra about you are what you measure will hopefully drive new behaviors around corporate environment and social responsibility. Changes in policy direction by governments, like what we're seeing in the US at the moment, do make this harder, but governments are often laggards when it comes to policy settings. Anyways, hopefully, with something like this, it will drive enough change with the really big ends of town, who will then put stipulations around their supply chains that they will also need to start changing some of their behaviors. It's important to remember that.
Speaker 1:This is one of those challenges, though, where it's not like.
Speaker 1:This alone isn't going to create a business environment in Australia that is all of a sudden sustainable. Just because you have to start reporting to the government isn't going to create all of the changes that we need to make set of changes that's coming through and hopefully will give some of the businesses that they needed to start making the changes that they've been putting on the fence. A whole pile of businesses. They've known that this is coming, but they're like, well, until somebody tells me that I have to do it, I'm just not going to do it Now. You have to do it, so get on with it.
Speaker 1:With boards if we think about the role for boards, they are going to have to upskill in what this means, not just at a compliance level, but also, well, how do we turn this into some type of advantage for us in the market? How can we communicate this in a way that consumers understand and see value in? How do we do this in a way that maybe means that we can have another look at our supply chains and update and get a more sustainable, resilient supply system to support our business as well? There's a lot of good things that can come out of it, even if businesses might be a bit grumbly about it for the short term.
Speaker 3:I'm also fascinated by tying those two things together. We're already seeing executive teams make a Cappex decisions based on what's been discovered in the initial ASRS reporting from a group, one perspective, and new projects are kicking off as a result, which I take as a very positive data point. I'm fascinated by this role that the reporting can provide to the board and how that can be tied together with the need for more agile thinking and how sustainability teams can help the board with that agile thinking yeah, Even the horizon scanning that we're talking about.
Speaker 1:It's another data point that makes it harder for boards because all of a sudden, they've got more data that they need to be considering when they're trying to make some strategic decisions. Also, boards need to find almost some new language and some new ways to communicate with their stakeholders and often their shareholders around. Look, we do need to do this now. This is going to require us to make some changes to our business, probably, which is going to probably incur some upfront costs, but here are the benefits. Maybe we'll see a bit of a drop in profitability this year, but we're expecting that this will convert into a more sustainable business over the medium to long term because of these other strategies that we've put in place. Hopefully it will push a bunch of those changes that we spoke about around, moving away from short-termism, but they are going to have to take stakeholders and shareholders on that journey with them as they go through it. It's not going to be easy, but again, just because it's not easy doesn't mean you shouldn't do it right.
Speaker 2:And David, a perfect segue to the next question, which is a conversation we have often with our guests, and that is about communication and sharing the information and taking others on the journey with you. One thing we find is that sustainability practitioners, because of the background that they come from, they're more challenged to articulate the long-term risks but also the opportunities that relate to sustainability, and especially when you compare that to more traditional quantifiable investments, like you know, marketing or investing in sales, do you have any advice on how sustainability practitioners can engage with their boards and also with their leadership teams and utilizing data to articulate those long-term risks and opportunities?
Speaker 1:Sustainability practitioners need to connect long-term sustainability risks to business value, like brand reputation, investor relations, regulatory exposure, and they need to find a way to accept and to probably even draw direct comparisons to traditional business cases such as marketing. If I'm a sustainability practitioner, I'm asking for $100,000 to implement some type of new practice. I know that the CFO has in her head well, if I spend $100,000 on marketing, I'm going to get this type of return on investment. So I need to be as clear as what the marketing department is. You have to take on that responsibility and just work that bit harder and make sure that there is a return on investment and use the language and the ROI metrics that make sense to the organization.
Speaker 1:And, like what I was saying before about the shareholders, sustainability practitioners need to take their CFO and their executive teams on a journey too, and their boards on a journey, too, around.
Speaker 1:Well, why is this good for us and how do we convert these costs into long-term benefits and value?
Speaker 1:And, whether that's, through what side of the equation, are we able to reduce our costs or reduce some of our business risks?
Speaker 1:And possibly making some sustainability changes might reduce our willing to pay us a bit more, or can we out-compete somebody in the market because we're able to articulate the fact that we are a really sustainable business. If you look at businesses like Patagonia, a pair of board shorts from Patagonia cost me twice as much as what if I just went down to City Beach or something. But I buy my board shorts from Patagonia because I want to support a brand that's actively trying to make the world sustainable and a better place. Their board and their executive have obviously thought about how do we make sure that our customers see the value and are willing to pay a bit more for the fact that we're doing the right thing sustainably. Sustainability practitioners need to take all of this responsibility on board and provide the information so that the business can make those decisions but then articulate it to the key decision makers and consumers so that there is long-term value built into it for the business.
Speaker 3:And how can sustainability help boards and how can boards help themselves in terms of improving their governance around sustainability and moving beyond that mere compliance box ticking and much more towards the proactive strategic leadership this is probably where it gets a bit contentious for board directors.
Speaker 1:When you start having these types of conversations, you start saying, well, how do we start to remunerate you or recognize your performance based on the business's ability to start making some of these really tricky transitions, these sustainability transitions? I think board should integrate sustainability into core governance governance, like tying executive remuneration to ESG targets, embedding sustainability metrics into performance dashboards they can be really simple metrics to start with. A lot of boards are reporting on customer acquisition costs or churn rates whatever those things are that your business decides are really important. We should have in those dashboards some of those core sustainability metrics and we should be engaging actively with stakeholders on sustainability risks and opportunities. Personally, I feel like these types of metrics help people understand in a really tangible way that integrating sustainability into business as usual will help build a business that is sustainable and in this instance, you know I'm not just meaning sustainability from an environmental perspective, but also one that's just around for a long time.
Speaker 1:As directors, our job is to ensure that the business does well and that the business succeeds. Directors often get a little confused with that role and they think that their job is to have really high returns for shareholders. That's what being a good director means, but actually it isn't. A good director's role is to make sure that the business does well. There is a really important difference there between making sure that our shareholders do well versus the business does well, because for the business to do well, you automatically need to think well.
Speaker 1:This business needs to exist for five, 10 years. Right? I could have a really great business that has huge returns for shareholders for the next one or two years but ruins the environment that it operates within and dies at that time. How am I doing my job as a director in that world versus the alternative, which is, yeah, have good returns for shareholders, but have a business that's able to operate for 10, 15, 20, whatever years in advance. When we start thinking like that, when we start thinking about my duty as a director is to the business, not necessarily to the shareholder at the expense of the business, then that will start to drive some really positive changes in how directors think and act.
Speaker 3:So, looking ahead and neatly tying this conversation together, what do you see as the most important shift for Australian corporations to make to truly embed sustainability into their core operating model?
Speaker 1:If you want to embed sustainability into your core business model. It can't just be a compliance task. A compliance task is the minimum you should be doing certain things, but it needs to be a bit more around mindset. It's a culture around commitment to innovating new solutions that deliver value for the business and deliver value for the customers, help us build a competitive advantage. It's looking at sustainability not just as a cost center anymore, but as a way that we can build some type of enduring advantage for the business.
Speaker 1:The reality is, particularly in the world that we're in at the moment, I don't think that there are a lot of consumers who are willing to pay a lot more for products or services just because they come from a sustainable organization.
Speaker 1:It'd be lovely to think that every business could just jack up their prices by 30% be sustainable, and everybody would be okay with it. We've got a cost of living problem in nearly the entire world at the moment, and so, while there are examples like I mentioned them before Patagonia, it's certainly not universally true, but I think that's where innovation comes in that mindset to work really hard at building a product or service that is sustainable, that doesn't provide extra costs to the consumer and, as a business, we start to think like that, we start thinking back into those old mindsets of you know, how do we build a competitive advantage? How do we build a business that's going to be able to outcompete a bunch of people? And that's a really healthy way for businesses to be thinking. Approach sustainability like that and I do think that, given the choice, consumers will pick products and services that are sustainable. They just can't necessarily take a huge financial hit to do it.
Speaker 2:Amazing advice, Dan. Should we get into the rapid fire?
Speaker 3:Yeah, let's do it.
Speaker 2:The first question is do you have one recommendation for our listeners? It could be book, a podcast, an article, a movie, a doco, a song.
Speaker 1:Look other than listen to the green fix, obviously as a podcast. I finished a couple of months ago Harari's Nexus on information networks and that is an amazing read. He's a bit of an alarmist, but it is an incredible book, particularly as we're all trying to understand this thing called AI and how it's going to influence us. He provides a really amazing lens on what are some of those challenges and risks and potential rewards that AI poses to us all. So if you haven't read it, go and read Nexus.
Speaker 3:Yeah, awesome recommendation from an absolutely awesome author. So we have this thing called the Green Fix Magic Wand, and so we're going to give it to you and we would like you to use it to create one change that you would like to see in the world in the next five years.
Speaker 1:I feel like I should say something really clever here, like getting rid of short-termism from corporate thinking. But I actually just think what the world needs at the moment is a lot more empathy. If we're able to inject a healthy dose of empathy into every human on the planet, we'd all be a little more accepting of differences, willing to consider different points of view, willing to give us the mindset and the vision to address some of those wicked problems a bit better. So yeah, if there's a magic wand, dan, I'd find a needle and go around and inject some empathy into everybody.
Speaker 3:Love it.
Speaker 2:Great use of the magic wand. We always like ending our podcasts on a positive note, so do you have one piece of positive climate news that you can share with us?
Speaker 1:I love that you finish with some positivity, because I don't think we. Often it's a lot of doom and gloom. I would just point to the fact that, despite all the challenges and the sometimes it feels a bit hopeless this space where we have come in the last 10 years is absolutely remarkable. I read this the other day there's something like six-time growth in household solar in the last 10 years. 30 times growth in utility scale solar, 45 or 50 times growth in household battery. 50 times uptake in EV usage across Australia in the last 10 years.
Speaker 1:So very low growth, very low base right Growth rate can seem artificially high, but that is amazing and that's actually venture scale growth. That's not just normal growth rate that you would expect to see. Any venture capitalist in the world would be amazed if they're able to find a business that achieve those types of growth rates. I actually take a huge amount of heart and confidence from when I read that type of stuff. We are doing it. Maybe we're not doing enough and maybe we need to do a lot more, but we are actually making progress. So let's give ourselves a bit of a pat on the back just to keep us energized and motivated to keep going.
Speaker 3:I love that Final question for you, David who is someone who has inspired you on your journey that you think we should interview on the Green Fix?
Speaker 1:I've been fortunate, dan, to have a huge number of influential people provide advice to me at seemingly the perfect times in my life, particularly in the topics that you talk about around some of these big challenges. There's a guy that I've done a fair bit of work with in the past he's a professor at Stanford and I was lucky enough to do my Fulbright with him A guy called Benny Banerjee, and he has a mind like very few minds on the planet, and his ability to think about complex problems and approaches for helping people understand and start to navigate their path through it is like nothing I've ever seen before. So I would go and have a chat to Benny Banerjee.
Speaker 3:Amazing. Thank you, that will be an amazing conversation, david. I've been looking forward to this conversation for so long. Every time we speak, I walk away significantly smarter and brighter. So thank you for joining us on the Green Fix. This has been a lot of fun.
Speaker 1:It's been a pleasure.
Speaker 2:Thanks, Dan and Loretta it's on the Green Fix. This has been a lot of fun. It's been a pleasure. Thanks, dan and Loretto. This was Green Fix with your hosts, loretto Gutierrez and Dan Leverington. We hope you enjoyed the episode. You can send us your questions or tell us who you'd like us to interview next. At info at greenfixpodcastcom, you can get your Green Fix every two weeks on Apple Podcasts, spotify, youtube and Pocket Casts.
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