The wide array of resources Earth’s population shares, the global commons, is at risk. We are reaching our planetary systems’ tipping points, and, as a result, experiencing unpredictable and widespread environmental changes that include rising heat and sea levels, global pandemics, shortages of food and fresh water, and rapidly declining biodiversity. Our economic system aims to promote financial growth, while keeping inflation in check, but has less regard for its effect on the well-being of humans and nature. As a result, our economy currently extracts more from the Earth than it can sustainably produce and emits more pollution than it can sustainably absorb.
As Dr. Samuel Myers, a principal research scientist at the Harvard School of Public Health and the founder of the Planetary Health Alliance writes, “These disruptions in the atmosphere, oceans, and across the terrestrial land surface are not only driving species to extinction, they pose serious threats to human health and wellbeing.” Mining companies, for example, often dump toxic mining waste in nearby streams rather than incurring costs to safely dispose of it. Instead, local communities are left to pay, as the waste ultimately contributes to increased poverty, cancer, birth defects, and other problems. Society must also absorb the costs of climate change and mercury pollution from burning coal.
At the same time, racism, income inequality, distrust, and political polarization are corroding the delicate network of collective social and governance commons. Business can compound these issues. The real estate industry’s discriminatory housing practices, for example, have significantly contributed to the racial wealth gap. And it’s well known that many social media companies’ algorithms have amplified racism, misinformation, polarization, and distrust, undermining support for initiatives that seek to improve the common good. As with climate change, solving inequality requires collective agreement, and when people view each other as contemptible, that’s difficult to achieve.
These environmental and social issues not only generate significant stresses on businesses (including their employees, customers, and suppliers), but also create an extraordinarily uncertain environment in which to plan and operate. So while businesses have played a significant role in creating issues, they also have the motivation and capacity to heal them. The time calls for businesses to re-imagine their role in society, conceive of a better future, and model the transformation they seek. Rather than maximizing returns through the degradation of the commons, companies need to optimize their activities by regenerating the commons.
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What Makes a Business Regenerative?
The Lyme Timber Company buys forests at risk of being clear cut—a process that degrades soil, reduces biodiversity, increases climate risks, and creates boom-bust local economies—and places conservation easements on them so that it can sustainably and responsibly manage them. Its model illustrates the potential of business to balance its impact on the commons. But what exactly makes a business regenerative, and how can businesses and entrepreneurs begin to build one?
A variety of people have described the concept in their work. In his book Regeneration: Ending the Climate Crisis in One Generation, for example, environmental activist Paul Hawken writes, “Regeneration means putting life at the center of every action and decision.” In a 2014 Harvard Business Review article, “The Seven Laws of Regenerative Enterprise,” management consultants Kim Korn, and B. Joseph Pine define a regenerative enterprise as “one that thrives forever,” and in her book Regenerative Business, executive educator Carol Sandford writes that regeneration is “a process by which people, institutions and materials evolve the capacity to fulfill their inherent potential in a world that is constantly changing around them.” In a 2015 white paper, Capital Institute Founder John Fullerton writes that “regenerative capitalism,” an idea aligned with regenerative business, “produces lasting social and economic vitality for global civilization as a whole.”
These definitions provide a foundation for the development of a more robust definition of and pathway to regenerative business. I’ve pursued both in my work at Jonathan Rose Companies, an urban redevelopment company that redevelops often-polluted sites into examples of green, mixed-income, mixed-use communities that advance resident well-being and opportunity. While the business is considered a leader in environmental, social, and governance (ESG) practices, the ESG framework has felt insufficient for addressing the issues of our time. So have the Sustainable Development Goals (SDGs), which, though laudable, we’ve found hard to translate into clear action.
After much exploration of these frameworks and rating systems, and my own efforts to guide my company toward becoming a more regenerative force, I produced a new framework I believe can help social entrepreneurs make their organizations more regenerative. At its core, it proposes that regenerative businesses have seven main attributes: an integrative world view, or paradigm; a systems-enhancing purpose; products that address the fundamental needs of society; products made with environmentally and socially responsible processes; a life-enhancing relationship with its people; thriving partnerships and networks; and regenerative use of its profits. Here’s a closer look at each of these attributes.
1. Paradigm
In her paper, “Leverage Points, Places to Intervene in a System,” Pew Scholar and MacArthur Fellow Donella Meadows writes, “Leverage points … are places within a complex system (a corporation, an economy, a living body, a city, an ecosystem) where a small shift in one thing can produce big changes in everything.” She notes that the most effective place to intervene in a system is “the mindset or paradigm out of which the system—its goals, structure, rules, delays, parameters—arises.”
A paradigm is a new way of thinking about a field of activity that gives rise to new ways of acting and associated outcomes. An example is the Mondragón Corporation, a federation of worker co-operatives founded in 1956, in the Basque region of Spain by a Catholic Priest José María Arizmendiarrieta. The company reversed a paradigm used by the Dutch East India Corporation (DEIC)—one of the first to promote the idea of a limited liability entity with multiple shareholders. DEIC focused on the profits it returned to Amsterdam, with little regard for the impact its activities had on the remote populations and resources it exploited. Mondragón's goal, by contrast, was to optimize the well-being of the Basque region and its people. Though the region had a long tradition of mutual, communal organizations, those organizations had disappeared under the Fascist Franco regime. Seeking a solution for impoverished parishioners and drawing from the Catholic social teaching of solidarity, Arizmendiarrieta proposed a cooperative as an alternative pathway to employment. The Mondragon cooperatives grew out of a worldview that companies would best serve their employees if those employees owned the company, and had a specific mission of enhancing the lives of local people through reliable employment and collective decision-making.
Today, with a collective revenue of $14.5 billion and more than 80,000 employees, Mondragon’s 96 cooperatives are accomplishing this goal. Each strives to earn a profit to share risk and increase stability, and all contribute to a common fund that provides unemployment benefits and makes loans to cooperatives experiencing difficulties. Instead of furloughing workers when the economy slows down, workers earn their normal salaries, accruing balances of owed working time that management can draw on when times are better. Workers can also move from struggling cooperatives to more successful ones. And to enhance the quality of life in the region, the cooperatives fund cultural and educational development that includes a university and a symphony orchestra. This people- and community-centered worldview, grounded in mutuality also extends beyond the region. The cooperatives trade with more than 150 countries and have inspired the formation of new cooperatives around the world.
2. Purpose
In her book Reimagining Capitalism in a World on Fire, Harvard Business School Professor Rebecca Henderson explains, “A clear, collective sense of a company’s goals that reaches beyond simply making money and is rooted in common values and embedded in the firm’s strategy and organization is an essential element of reimagining capitalism. … Building a genuinely purpose-driven organization is in itself an act that creates shared value.” Purpose beyond profit, when it is deeply embedded in a company’s operations, is another attribute of regenerative businesses.
In 1994, entrepreneur Ray Anderson proposed that Interface, the US flooring company he founded, become one of the world’s first environmentally sustainable and restorative companies. The company’s website reads: “This ambition was one never-before heard, but it set us on the road to becoming the purpose-driven business we are today. To live zero every day and reduce the impacts of our business and our operations on the planet. We’re living proof that a little change—and setting moonshot goals—can be a force for good.”
The firm went on to set aggressive targets for its production, including zero waste to landfill, zero fossil fuel energy use, zero process water use, and zero greenhouse gas emissions. To achieve these goals, it became a leading proponent of circular economy practices, creating economic value by building recycling into the lifecycles of its products. For example, Interface pioneered the process of reclaiming the old carpet its flooring often replaced, decomposing it, and using the resulting chemicals as feedstock for new carpet or backing. This reduced landfill, and eliminated the need for additional mining and fossil fuel to generate new materials. Today, Interface seeks to be regenerative. “Our mission is to overcome the biggest challenge facing humanity and reverse global warming,” its website states. “It’s no longer enough to limit the damage we do but to think about reversing it. We want to restore our planet and leave a positive impact, to create a climate fit for life.”
3. Products
A regenerative company actualizes its purpose by creating more socially and environmentally responsible products. Steel, for example, is one of the top three most carbon-intensive products made in the world. One alternative is “green steel,” which only the Swedish company SSAB currently makes. Motivated by the European Union’s focus on decarbonization and customer demand, SSAB manufactures its steel using an innovative combination of hydropower-generated electricity and hydrogen that emits 98 percent less carbon dioxide than normal steel.
Biological materials also have much lower environmental impacts. Primarily made of carbon molecules, companies can grow them, and at the end of their useful life, compost them back into soil. Companies in Europe and Canada are now constructing buildings as tall as 24 stories using heavy timber framing and building components. HoHo Vienna, the world’s tallest wooden tower, is one example. Companies can factory-cut timber structures and prepare them for prefab systems, significantly reducing waste and labor costs. Using sustainably harvested timber can also support long-term jobs in rural areas and enhance forest health.
4. Processes
The processes a company uses to make its products express its mission. The best ones are elegant, efficient, and compassionate, and enhance the social and ecological commons. Aerofarms, for example, is an urban vertical farming company whose mission is “to grow the best plants possible for the betterment of humanity.” It develops its farms in low-income communities that need jobs and access to healthy food, and by growing food in controlled environments, it uses 95 percent less water than typical farms and zero pesticides. Its processes integrate plant genetics, food safety, and nutrition with data science to provide an extraordinary level of feedback that, in turn, increases food quality and nutrition, and reduces costs. To date, it has grown more than 550 varieties of food, and it can produce food 365 days a year.
5. People
In a 2021 Newsweek editorial, Sharon Salzberg, co-founder of the Insight Meditation Society, and Diana Calthorpe Rose, founding president of the Garrison Institute, wrote, “A recent survey found 93 percent of health care workers are stressed, 86 percent experience anxiety, 82 percent felt emotionally exhausted, 70 percent had trouble sleeping and 76 percent reported burnout. Who will care for caregivers, so they can continue to care for others?”
Regenerative businesses foster a culture that helps employees thrive by offering meaningful work, fair compensation, and, importantly, emotional and social support in the workplace. Salzberg and Rose suggest that contemplative-based resilience training (CBRT) can help improve worker well-being and resilience. CBRT uses tools such as meditation and psycho-social processes to help encourage awareness of the stresses workers encounter, offer ways to restore physiological and life balance, and emphasize the importance of social connection. Training employees to understand and attend to these needs improves their well-being, a condition of worker happiness and regenerative thinking.
Services for the Underserved (SUS)—a nonprofit that promotes independent living for victims of domestic violence, people getting out of prison, people recovering from mental illness, and others—is an example of an organization using this approach. It offers CBRT to its employees to help them address the vicarious trauma that they absorb from clients, reduce burnout and turnover, and improve worker well-being and job satisfaction.
6. Partnership
Every business has transactional networks; each buys resources and services from some suppliers, and sells products and services to others. Most businesses are motivated to get the best price during these transactions, even if it stresses or depletes the counterparty. Regenerative businesses develop partnerships and networks, by contrast, aimed to advance each organization’s mission and increase its resilience. The best partnerships provide reciprocal benefits, with the goal of mutual enhancement.
Thriving partnerships—nurtured by integrity, shared purpose, trustworthiness, and efficacy—can enhance organizational stability and encourage innovation. Accountants call these qualities “intangibles” and value them as “goodwill.” When partners no longer trust a company or its products, the value of its goodwill can drop precipitously. For example, soon after the German drug company Bayer bought the agricultural products company Monsanto to diversify its product offerings, its market value declined by more than $20 billion. Much of that loss was in goodwill, as a result of Monsanto losing a $2 billion lawsuit related to the cancer-causing effects of its Roundup weed killer.
On the other hand, the pharmaceutical company Roche has benefitted greatly from partnerships grounded in mutual benefit. Like most biotech firms, Roche’s richest source of income typically comes from the realization of its patents. To grow its intellectual capital, it operates several research and development (R&D) units, enhanced by a network of more than 150 external partner organizations. Forty percent of Roche’s sales come from partner-originated R&D. To achieve this, Roche has permeated every part of its business with a partnership-seeking culture that encourages innovation, respects scientific rigor, and shares common values. For the last nine years, Roche has been voted the No.1 partner of choice amongst drug researchers.
7. Profits
The regenerative capacity of a firm is grounded in its philosophy about the purpose of its growth and its profits. A regenerative company views profit as a resource to support its purpose, invest in research, participate in networks, develop new products, enhance its processes, build reserves to increase its resilience, invest in its people, and support employee and community well-being.
The most challenging question is how companies should distribute their profits. Our current economic system posits that the people who work hard to develop innovative ideas into viable businesses and the people who invest in those businesses deserve the most economic reward. But it also posits that clever investing is a sufficient cause for profit, even if it undermines the well-being of humans and nature.
To create truly regenerative businesses, we must develop profit allocation models that support the well-being of the systems they are part of. This brings us to ownership. In his research paper, “Owner, Agency and Trusteeship,” Colin Mayer, a professor of management studies at the University of Oxford’s Said Business School, compares various models of business ownership and concludes that ownership is not only a bundle of rights but also a set of obligations and responsibilities to people and planet. We need to expand our view of the allocation of profits to include serving our obligations and responsibilities.
One interesting, potential ownership form to serve the commons is the “purpose trust,” which holds fiduciary responsibility for a business’s purpose. In 2020, Berrett-Koehler (BK), a mission-focused business publisher, transformed its founder’s sole ownership into a multistakeholder purpose trust. Today, the founder, a mission-related nonprofit, an author’s co-operative, an employee stock ownership plan, and others own interests in the company. The purpose trust ensures that the content BK publishes will honor the company’s mission and that BK will recycle its profits to support the company, as well as the authors and supply chain partners in its ecosystem.
A trust also owns the global engineering firm Arup. Its profits are allocated to serving three goals: improving the firm’s infrastructure, advancing research that improves Arup’s practice and addresses social issues, and profit-sharing with all employees.
At present, many businesses are degenerating, rather than regenerating, the global commons. Entrepreneurial businesses have the flexibility to experiment and model ways of thinking and acting that could provide the seeds of a more regenerative future. If we imbue our business systems with the recognition that our social and environmental systems are connected; deeply embed purpose in business operations, in ways that enhance the well-being of humans and nature; and dedicate profits to advancing these objectives, then businesses can be a force for regeneration. No single firm, leader, writer, institute, school, or regulator will fully define regenerative businesses, but together, we can create a field of thought and action that might.
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Read more stories by Jonathan F.P. Rose.