Kees Klomp: 'Only Intrinsic Motivation Results in Transition'

50 years ago, the Club of Rome published its report, The Limits to Growth, which already expressed great concern about the future of the world. Not nearly enough progress has been made since then. We all feel uneasy about it, but the turnaround you describe is almost inconceivable. How can the concept of ‘economy of meaning’ contribute towards companies’ sustainability journeys?
‘It all starts with an open, benevolent mindset in the boardroom. You can have the necessary knowledge about climate change and the transition in order to take action, but ultimately, the key to everything is everyone being intrinsically motivated. Current economic policy is primarily driven by extrinsic incentives such as CO₂ pricing or sustainability grants, which make certain behavior easier or more difficult. Yet the Dutch economy is only 24% circular, and the global economy is 9% circular. Ergo, we are seriously behind on the goals. My hypothesis is that we cannot move towards 100% based on extrinsic incentives. There is not a company in the world that does not influence everything else in our ecosystem. Directors need to feel that their decisions intrinsically matter and that there is always a choice between positive and negative, constructive and destructive.’

It might take a very long time for individual directors to become intrinsically motivated. Can the business community as an entity play a role in this, and if so, what role?
‘Not only can companies play a role – I even have greater faith in companies than governments, because they can take active and proactive action. That is much more entrepreneurial than governing and managing policy. The most interesting examples of transition behavior right now come from the business community. Just take Volkert Engelsman from Eosta, for example. As a pioneer in the organic farming sector he advocates true pricing. If the business community were to embrace this as a policy principle, we would make substantial progress.
A second way to gain speed is through pre-competitive business collaboration. Tony's Chocolonely shook up the cocoa trade by promoting 100% slave-free chocolate. Initially, this was very controversial, but they are now working with major players like Nestlé and Mars to collectively eliminate child slavery from the supply chain. I expect more progress to come from those types of initiatives than from waiting for governments to implement legislation and regulations. It would also help if conventional and social entrepreneurs were to get know each other much better. In my experience, interaction and dynamics between those two groups are never awkward and tedious. Instead, there is an extraordinary amount of mutual respect for joint entrepreneurship. We can also learn a lot from each other. For example, from a strategic perspective it is extremely smart of Unilever to acquire a company like the Vegetarian Butcher. Besides the fact that the vegetarian and vegan market is a growing market, they are also introducing a different culture and perspective and therefore a different conversation about profit and value.’

New companies like Tony's Chocolonely or the Vegetarian Butcher can think freely and make different decisions. This is a lot harder for existing companies, if only because there is a certain profit expectation. Many companies have formulated a purpose by now: Why do we even exist? However, research has shown how that purpose is often an empty shell that does not really resonate with and is not really understood by internal and external stakeholders. What is needed in order to take the conversation to a higher level?
‘It starts with honesty about what the scientific facts are telling us. When it comes to climate change and eco-diversity, the scenarios are still much darker than we think. I don't know if it's ignorance or unwillingness, but even in boardrooms I still come across too many people who do not realize what is happening in the world. And if you are fully aware of what is going on, you cannot help but prioritize the transition in every decision.
I compare that journey towards honesty with kicking an addiction. An addict destroys their own life and that of others, but always finds an excuse not to change. Until at some point something happens that makes the addict unable to deny the truth any longer. The addict reaches rock bottom (a familiar term in addiction circles) and goes into recovery. The process we now find ourselves in has extraordinary parallels with that situation. We are pursuing ESG goals, but we are actually kidding ourselves. We may be doing less bad, but we are still far from systemically good. It is only by being honest about it that something will change and that we will be able to kick our addiction to money and growth.’

In practice, every generation has new 'addicts' who primarily strive for profit maximization and self-interest. What is ‘rock bottom’ in a business context?
‘We are in the midst of a dormant economic crisis. Everyone knows that companies – and especially the major emitters – need to reduce their CO₂ emissions. They are living in a carbon bubble; a potential financial bubble. If they are really going to have to start paying for their emissions, it is going to hit them very hard. That could be their rock bottom. Projections from research firm Swiss Re show that further climate change will cost 20-30% of gross domestic product, which is an unimaginable blow. As the crisis becomes more palpable, it will be less and less about the virtue of social accountability and more about the realization that there is no choice. Companies that only focus on financial parameters will ultimately be more vulnerable to the inevitable disruption.
It is very important that Supervisory Boards and Boards of Directors begin their sustainability journey with a deep awareness of the causes behind their business’ rock bottom, and on that basis to be intrinsically motivated to provide the bold leadership that is required – together.’

And yet the entire top tier of the business community has grown up in the classical economic system. How do we ensure that we won't reflect on COP26 in ten years' time and conclude: it was a good warning, there is a lot of good will and great steps have been taken, but it is all too little, too late.
‘We need to present a promising perspective. In the neoclassical ideal, anything that does not contribute to prosperity is a disaster scenario. Lots of people could not imagine living in a world where the economy is 25% smaller and immediately associate that with a recession. In scientific terms, it is of course nonsense to believe that we can escape the current crisis merely through growth. After all, it was caused by growth. The current system wrongly assumes that growing prosperity automatically has a positive impact on well-being and welfare. It is simply not true. Since 1960, prosperity in the Netherlands has only grown at the expense of our personal welfare and well-being, which includes objectively measurable things like soil and air quality. I am a huge fan of the Wellbeing Economy Alliance – a collaboration of organizations and governments that strive for an economy that produces human and ecological well-being. The participating governments of New Zealand, Iceland, Scotland, Wales, Finland and soon Costa Rica have abandoned gross domestic product as the sanctifying instrument. Instead, they now base their economic policy on the Gross National Well-being Index, which consists of around 60 parameters on seven aspects – economic, environmental, physical, mental, work, social and political – that must be in balance. In the Netherlands, we are now familiar with the CBS’ Broad Prosperity Monitor. The next step is to not only monitor, but to actually use the results as a policy principle. My hope – and slight expectation – is that this bears fruit and inspires companies to define ‘value’ in very broad terms, measure it, make it transparent and prioritize it in their decision-making. After a deep awareness, this could be the second concrete step that directors could take.’

In that context, how do you envisage the CFO’s changing role? In many companies, the CFO is turning into the Chief Value Officer (CVO) and is responsible for protecting value as part of that role. Is that a good starting point to accelerate this development?
‘It could be, provided that the CVO is given space to develop policies that measure value differently, based on created or destroyed prosperity, well-being and welfare. A good example is Commonland, a relatively small Dutch company that restores seriously degraded farmland and has developed a standard, scientifically validated method for calculating long-term returns. As part of the method, financial capital weighs just as heavily as social and natural yield. Investors in Commonland are satisfied with that. This example underlines the importance of finding a language and method that speaks to people and thus creates support. As far as I am concerned, that is a very substantial scientific task.’

Directors of large organizations have a great deal of influence due to their position and network, and they are ideally placed to initiate the major changes that are needed. Many directors want to make a personal contribution, but find such a radical change too complex. Why did you leave the fast-paced marketing world, and what advice can you give others based on your experience?
‘Honesty dictates that it probably would not have happened if I had not had a burnout in 2005. As a marketing consultant, I worked on campaigns primarily aimed at more products, more profit, and more market share. I had felt uneasy about that for a while, but it was not until my body literally gave up that I had to take a serious look at myself. That was my rock bottom moment. I began to wonder why fundamentally wonderful companies so often reduce themselves to just that profit goal – that addiction to money and growth. That was the basis for the concept of ‘economy of meaning’.
I speak to many social entrepreneurs, lots of whom have also taken the path less travelled by – until they were ‘called’ by something in their personal lives. Yet you don't necessarily have to suffer a personal crisis in order to get moving. You simply have to be honest about what you are actually creating as an entrepreneur. For the late Ray Anderson, CEO of flooring company Interface, reading the book The Ecology of Commerce by environmental campaigner Paul Hawken changed everything. It was a revelation for him – ‘a dagger in the heart’, as he called it. Then, like a crazy activist, he transformed Interface into the world's first circular company in no time. They are now well on their way to becoming the world’s first climate-positive corporate. He was personally moved by that book, but his influence as a CEO was so great that his entire company went along with it. That just goes to show how much influence directors can have. Nobody needs to wait around for the government or shareholders. Motivated, aware and courageous CEOs can start now, by convincing stakeholders that investments in broad values will ultimately create a more robust, resilient and healthier company.’

This article was published in Management Scope 03 2022.