Michael Lenox’s a business school professor at the University of Virginia Darden School of Business where he’s also a chief strategy officer. He’s also coming out with the book in the next few days Can Business Save the Earth: Innovating Our Way to Sustainability by himself and Aaron Chatterji. It’s an academically rigorous book. However, it’s also for mainstream people. I read it as a mainstream person and I found it totally readable. As you know for me the main focus is on behavior. I’m a big fan of science, I’m a big fan of analysis but if it doesn’t result in a change of people’s behavior I think that’s what we really need. You’ll also hear me talk a lot about systems and this book is about systems, all the different systems and all the different parts of the economy and innovation that affect the environment. Now you could look at that and say, “Well, it’s so big. I can’t do anything.” You could also say as he does, “It’s so big. You can do something.” Our conversation focused a lot on systems in the environment. You can play a role and it’s not that hard to find a role to play. So, I appreciate his perspective and I think you’ll learn a lot too.
Joshua: Welcome to the Leadership and the Environment podcast. This is Joshua Spodek. I’m here with Michael Lenox from University of Virginia Business School. Michael, how are you doing?
Michael: I’m doing very well today. Thank you for having me.
Joshua: Glad to have you here. And the reason that we got in touch was that you have a book coming out called Can Business Save the Earth. And I want to talk about it and I read it with great fascination but maybe you can say a little bit about yourself. You come from a background, I really like this background because I have this strong academic background and I like that and so you have one. The names of the places that you’ve been are like the top places in the country and in the world but maybe you can give a bit of short biography.
Michael: Sure. So I actually have a background and first engineering so I did a bachelor’s and master’s here at the University of Virginia in systems engineering with a specialization in environmental systems. So I’ve got a longstanding interest in environmental issues. Eventually, I went back and got my Ph.D. at MIT in economics but in a program called Technology Management and Policy. And I think it really well summarizes where my interests lie. At one level I’m interested in markets and business, I teach now at a business school, but all along interested in technology, innovation and entrepreneurship. And then last but not least very interested in policy and in particular around environmental issues. For about the last 25 years I’ve been doing work really at the interface there you know talking about businesses and sustainability before really even using those terms. So I spent time at the Faculty of [unintelligible] at NYU before joining University of Virginia in 2008.
And in terms of my work you know for me there’s been an interesting evolution. I started off doing a lot of work looking at what we might call corporate sustainability. How do we get large corporations to, using my economic speech, how do you internalize the negative externalities that businesses often create? And I had a real kind of epiphany about you know 10 to 12 years ago especially around the time of the recession, the Great Recession, which is maybe we’re thinking about these problems in the wrong way. Long don’t work around again innovation and technology and in particular around disruption and how disruptive technologies can replace the current status [unintelligible]. And so that let me down a train of thinking that says when we think about some of these environmental challenges it might not be getting that large incumbent firm to change your behavior. Maybe at General Motors or the like. It’s actually that we need to think about how do you create disruption in markets so that old technologies are replaced by cleaner technologies, more sustainable technologies. So it might be you know General Motors going out of business but being replaced by a Tesla or maybe another startup or the like.
And so that really is a motivation behind the book is to try to think about how do you leverage markets at the end of the day to generate the types of disruptive, sustainable innovations and technologies that we need.
Joshua: So you’ve talked about a lot of different things innovation, systems, markets and plenty of other things and systems was the thing that got me and I remember it wasn’t like a big thing in your book but at one point you said, “Systemic challenges require systemic solutions.” And is that what I’m hearing when you talk about the market like getting one… GM as big as it is to get GM to change is not as big as getting the systemic change.
Michael: Yeah, exactly. In some ways you know literally we used the title of the book to be provocative and in a good academic speak you know the answer is it depends. And I think that’s actually a critical point of the book is that the way business and markets behave is depended on the larger institutional structure the system that it’s embedded in. And that’s a good story actually, a good news for us because what it tells us is there are ways in which we can influence that system to get it to move in the direction we need as a society. It’s not that you can design the whole system. There’s no on Nipigon designer here who gets to determine how our social, cultural, economic, political system is structured but it does mean that there are various institutional players who can have different roles in moving that system forward, moving those innovative outcomes forward. And so we very much take in the book what we call a systems perspective on how we make progress on these critical sustainability challenges we face.
Joshua: Yeah. To me a systems approach is the only push it works. I’m sorry, so you need to take a systems approach here. Is it the only way I’m not sure but without it I think you’re missing things. And that’s one of the big things about your book that I like and I have to put it aside here – you’re an academic, I’m an academic, this book I think an academic would find themselves at home but it’s really for the public. I think anyone can pick up this book and start reading it. I mean it’s the footnotes are there but they’re not distracting.
Michael: I’m glad to hear you say that because that was definitely our intent. You know this was not designed to be a book to speak to other academics. We really are trying to get a broader audience here and that’s always been our intent.
Joshua: Yeah. I thought you did a good job on that because there are plenty of places. I read it just as me as you know someone’s reading a book and there were plenty of places where I thought, “Oh, they did that research. Good. I want to look that up.” But I didn’t have to. And yeah, you did it so I didn’t have to.
So changing systems is really hard. I mean you talk about a lot of different roles and I agree that there’s not going be one person who can make all this stuff happen. And politics the way they are in this country it seems like people with systemic perspectives they get drowned out by people without systemic perspectives like pointing fingers. So, there is a question of can we, can business save the earth? There’s also a question of like how does that actually happen?
Michael: Yeah, and I think that’s where it’s maybe dissatisfying because you would like to be able to say you know here’s our triumphant hero who is going to come in and save the earth. And unfortunately, things don’t work that way. What I worry about sometimes when I look at like say environmental debates and especially environmental policy debates is we often look at what I would say is a small set of levers that are available to us and in particular when it comes to things like climate change we look at things like putting a price on carbon. Maybe via a carbon tax or maybe a cap and trade system. I’m very supportive of doing that.
With that said though, that’s not the only thing that we need to look at. And in fact, just to be provocative I would say even if you were able to wave a magic wand which you know this would not happen in the current political environment but we’re able to get a cap and trade system instituted at a federal level at the U.S. That’s only one step among many that need to occur for us to actually achieve the changes that we need.
And so what I’m hoping the book does is start to raise up in people’s understanding of the multitude of other levers that are available to us. Patent policy as an example of something that could be used to try to get more innovation and more innovation towards clean technology. Obviously, controversial too right now but immigration policy. You know we have a talent deficit of specialists and talent in the United States. How immigration policy could help fuel that innovation engine here? And it’s not just the federal government, it’s all different types of players and institutions that can play a role here. It’s the you know activist group who is getting better information to consumers about who has clean technology versus less clean technology. It’s of course business themselves. It’s the business leaders who have a lot of discretion about how they direct their enterprise, it’s investors you know so we keep going down the list but all of those stakeholders have a role to play here and moving the system forward.
Joshua: OK. So this ties together something that I… You said this when you were talking earlier and it clicked now. Let me see if I get it right. A lot of people out there think what’s the silver bullet. I mean you’re supposed to say, “There are no silver bullets here” and you’re saying that there’s lots of different things that would have to happen to make this work and most people don’t get what they are. And so you’re bringing together these are the different roles, these are the different perspectives, these are different things that people can do. And if you were to think that it’s just one of those, you’re not going to get it and that can actually exacerbate some of the problems.
Michael: We do have the example in the book that I like that you know to be the number one environmental technology innovation of the previous century around you know 1910 period you could argue it was the automobile. And the reason was it was replacing horse strong carriages which actually were a huge environmental problem because of the manure created. Especially in large cities like New York the collection and disposal of manure was a huge technological logistical challenge and was considered an environmental threat.
Now of course we know now years, many years later that of course that there’s a global climate change, your contribution from the burning of fossil fuels and so the automobiles looked at as an environmental bad, at least in the internal combustion engine. So that maybe sounds a little too technology optimistic of me to say this but that’s what we’ve got to keep inventing. We’ve got to keep challenging ourselves because it is hard to predict the way technologies will evolve and the impact that they will have it. Like you said maybe the increases and then adoption that occurs. And so, we’ve got to continually be working on.
Joshua: Yeah, it’s a big systems effect that when I teach my systems class I often point out that the problems that you’re trying to solve today were generally solutions to something before and the solutions [unintelligible] there’s going to be some problem sometime in the future. It feels like an essential property of systems that things like that happen but that doesn’t mean you can’t keep doing things because the problem…They will persist if you don’t work on them.
Correct me if I’m wrong but partly I think your approach to come from a business perspective is not just because you have a business school background but that it’s not a static approach to say… I think business’s used to saying, “If I do something in this market, I will affect the market.” And that is, I don’t know how to put it, it’s like an active reactive feedback system that I think a purely academic approach or a lot of people that don’t have a business approach they think there’s a static thing that I’m going to approach and they don’t realize that they can influence if they get… And I think business people have that. I think quantum physicists have that too because at the end of the experiment it affects what happens.
Michael: Yeah, I think you know one of the interesting things for me kind of career wise is that when I was doing my doctoral work you know my intent originally was to actually get a job in like a policy school. And as I was doing my work it got hooked up with a research group called Technology, Business and Environment is run by a gentleman John Ehrenfeld, it’s kind of legendary…
Joshua: Oh, yeah, you mention him in the book.
Michael: Yes. Yeah, and he’s done some great work himself in this space. And I think what I really came to appreciate is the power that business and markets can have in effecting change. And we talk about as we tackle this right at the beginning of the book that you know to some people interested in environmental issues this sounds heretical. You know business is the problem. Business is creating these environmental issues. You know businesses the evil bugaboo here that we need to defeat even some would say. In part that kind of motivated the title here because again I think for some people that question might even seem ridiculous. I believe in the power of markets. I certainly believe in the power markets for driving innovation and change. This is a very good academic for a second you know perspective of Joseph Schumpeter, famous economist, about the creating the gales of creative destruction. I think that’s maybe still even to this day an underappreciated part of how markets and business work.
And so, I’ve long been intrigued about how do we leverage this institution that we’ve created, this institution of markets and business to effect positive societal change. And again, I think at the very least it’s got to be part of the solution. We can’t ignore business if we really want to take these environmental challenges seriously. This is not a book to tell you as an individual citizen or consumer or how to be more sustainable. This is not a book that tells business you know here’s how to be more sustainable. Those books have been read. There’s hundreds, if not thousands of those books out there. This is about that systemic approach and understanding the role we all play and how we all can influence the system in different ways.
Joshua: So now I want to go back to what… You said it’s been a passion for you for I guess your whole life of the environment and you talked about I think you said hiking or going out in the wilderness or…When you think of the environment what do you think about? What do you care about?
Michael: You know it’s funny and I think we have some of these big existential crisis issues like climate change. You know water is becoming a critical issue in many parts of the world. The water to be clear it tends to be a more regional issue so we’re very blessed here in you know central Virginia where I live where you know water scarcity really isn’t much of an issue. There are sometimes droughts we have to be concerned about but we’re generally doing pretty good on that.
I think you know again as someone who’s spent most of my life on the East Coast of the United States when I think of a critical environmental issue one that comes to mind of how it affects our daily life is land use planning, the way we design our cities, the way we create the ways we flow between different parts of our lives so it impacts everything from you know suburban sprawl, traffic but it also increases our environmental footprint as well. Those issues aren’t well tackled in the book I have to say admittedly but those are always in the back of my mind about how we’re not thinking about the system and we let things sometimes just kind of naturally evolve. We sometimes get these repercussions that hurt us in longer term. And then to make some of these solutions less viable you know think about rail in Europe versus rail in the United States. You know a part of that is just because of the way we’ve allowed our communities to develop here in the United States.
Joshua: Oh, man. I’m not flying for environmental… Well, to live by my values. And I took a train ride from Salt Lake City and back and in Japan that would have been really fast. Anyway, I don’t want to talk about it.
So I’m still curious. What’s the passion? What about the environment… I mean you don’t sound like this is just an economic thing for you. I’ve asked this question of a lot of people what I’m asking you now. It’s like what is driving you? What do you care about? What do you think about when you think about the environment? And you are talking about academic issues. But one thing I have been very pleasantly surprised at is that people have incredibly different answers. Yes, I agree that no one’s anti-environment but some people… There’s a couple of big broad things, some people, there’s something from the childhood very positive that they associate it with, maybe with their family or their dog or something like that. Some people this is very negative dystopic future that they’re really scared of. Some people it’s their community around them and maybe there’s an issue of just building a mall over some park that they like or something like that but there’s always this visceral something that seems to… I find incredibly fascinating and I really didn’t expect it because I thought everyone thought about things like I did. And it’s not the same at all. And so, I find it really interesting and I think part of the reason I stick with it, asking it is that I think listeners also don’t expect this diversity of perspectives and passions that come to play and everyone’s different.
Michael: Yeah, I think that’s right. I think that’s right. I mean again getting back to my theme that no one is anti-environment you know we all experience the environment in some way or another. And you know just a lot of that’s going to be the circumstances that we were raised and where we live, it could be that you were in an urban environment that was highly polluted and that you remember those days of you know dirty air, coffee and like it might be that you grew up in a on a farm in the Midwest and you were you know remember those experiences. Those are all environmental experiences at one level or another and they influence you know our passion around this topic.
Joshua: And is there something like that for you?
Michael: Well, again I think I’ve always been inclined with the outdoors and I’m not sure where that came from. Some of it comes from my parents but they were more water people and I’m actually a water person too. So getting out on the water in different ways, going to the ocean, I can still do that and enjoy that. It was more of my collegian, my undergraduate years that I really picked up the appreciation of getting out to the forest and the mountains. Again, going here to UVA as an undergrad we have a blessing of the national park right on our doorstep [unintelligible] national park and really getting excited about those opportunities. And I think that’s just continued in my life. And I’ve lived again, I’ve lived in smaller college towns like here in Chapel Hill, I’ve lived in major cities like Boston and New York and there’s always an environmental component to that it in one way or another.
Joshua: So yeah, the water one is very interesting. A lot of people on the show have had water once and it fascinates me because water hasn’t been a big deal for me although I mean obviously I like clean water but the last time I was out on a boat in the water was a long time ago. So I’m curious if you know one of the big things about my show also is… It’s Leadership and the Environment and I because I think one of the major issues out there that I don’t think technology addresses is that so many people feel like I want to do something but if I do something but no one else does what I do won’t make a difference and so I’m not going to do anything which is to me the opposite of leadership, it’s acting against your values and following others. And I asked people on the show at their option if they’re interested in taking on a challenge to live by a value of theirs. And I wonder if you’re interested in taking on a challenge to live by what drives you about the environment.
And I didn’t mention this to you before but there’s a few constraints and non-constraints that I put on it to make it a little easier for people because… It doesn’t have to solve all the world’s problems overnight all by yourself because a lot of people…
Michael: That wasn’t going to happen but that’s good to know.
Joshua: And it can’t be something you’re already doing and it can’t be telling other people what to do because we got enough of that already. I don’t think it’s particularly helpful. So it’s something that you’re not already doing but something that would act on a value of yours. Most people, some people on the show have thought of it before but most haven’t. And sometimes it’s a bit of going back and forth coming up with something. But that’s the main thing. You know it does not have to solve everything. It can’t be something you are already doing. It can’t be telling other people what to do.
Michael: I think it’s a great point. I mean I think we all you know have aspirations for how sustainable we will be as individuals and then the reality hits so putting a challenge to us is a good one. I’m going to give you a personal answer in a second but it does come to mind two different things that I’d like to talk about. One, we had a Harvard program here at Darden where we talk about how we live and how we learn in terms of our sustainability efforts. And I didn’t coin that phrase and it really resonates with me though because what we’ve said is like we’re doing a lot educationally with our students but we also have to walk the talk. We have to be authentic ourselves and we have two 2020 goals to be zero carbon emissions and zero waste by 2020. And I’m very proud to say we’re going be zero carbon within hopefully next couple of months. We actually have a PPA with Dominion Power to develop a new solar facility that will allow us to make that claim. The waste one is going be a little more challenging but we’re working towards that. So I like this idea that you know to be a leader you do not just espouse these things, you have to actually live the values yourselves.
The second thing was the second part of our how we live and how we learn, I definitely think you know I have a leadership role as an educator and we were talking earlier, I think one of the greatest injustices that unfortunately business schools have perpetuated is the notion that the purpose of business is to maximize shareholder returns or better said businesses to make profits. That’s actually a very simplistic viewpoint. And really, I actually would argue kind of a naive. First of all, it’s not legally accurate there. The reason we give limited liability to corporations and individuals running corporations is typically because there is some societal good that they’re producing. Any state you know corporation, [unintelligible] corporations usually puts something like that in there. I think it’s also wrong from just a strategic sense. I teach you know first year MBA business strategy and we often frame it as you know you have some discretion about the values and the direction of your organization. Now I don’t want to be here saying that you know profits don’t matter. They do but they matter in the sense that they help provide resources for you, they attract capital like for you to execute on the vision and the mission that you adopted as an organization. That’s a very different framing there. The end in [unintelligible] is the authorization is not the profits. The profits are a means to an end that are expressed by the business or by the corporation. So that’s the second thing.
Third, getting to your personal challenge and one you had mentioned offline to me but I think is an excellent one and one I need to take more to heart. We’re doing some work right now looking at decarbonization across a number of different sectors trying to understand what’s the likelihood we can do that in the next 40 years or so. We’ve looked [unintelligible], we’re looking at renewable energy right now, we are doing a report on near future on industrials like chemicals, cement and the like. Well, one of them that’s in the back of our mind is agriculture. And one of the biggest, not biggest but at least one of a major source of greenhouse gas emissions is agriculture and especially when you think about the production of beef. And I often enjoy a good steak and a good hamburger. So as a personal challenge I will swear off meat for… I don’t know, Josh. What’s the time frame I have to give you on that?
Michael: It depends. People have done different things here. Some say changing diet is…People recognize it’s one of the major things and I think a bunch of people have seen this as an opportunity of like, “Oh, now I can do that thing I’ve meant to do for a while.” So some of the heavy meat eaters will do something like on the scale of weeks to a month, some of the non-having meat eaters… Sometimes people say. “I’ll do no beef” because that seems to be the biggest contributor and they’ll still stick with fish and chicken and something like that. But some go whole hog, no pun intended, and say no meat at all. And so, I’m really glad that you shared that you love it that you like a good steak. Because if you didn’t like it, people would say, “Yeah, yeah, yeah. Well, he doesn’t like it but I do.” And that humanity is a big piece of it.
Michael: So how about I’ll swear off beef for the next 30 days?
Joshua: OK, so that sounds like a challenge. I know that I’m not into steak but there are foods I love going without food for 30 days would be a challenge. But I also hope that the reason you’re doing it is not the challenge part but the value that is connecting to.
Michael: No, I think like you said, you made an excellent point there and it is so easy to get overwhelmed with that your individual action doesn’t add up because you know we’re talking billions of people need to make changes in their behavior but it all starts with yourself.
Joshua: Yeah and I predict that…There’s something you said earlier. Everybody cares about the environment. What matters is how much you are willing to sacrifice. And I predict this experience for you may change a perspective that you won’t see what looks like sacrifice now will later seem not so sacrificial and you’ll actually enjoy something about this experience. That to me is one of the major, major pieces of leadership in the area of the environment is to change the perspective of people saying instead of seeing the goal… Instead of seeing it as a deprivation and sacrifice, to see it as opportunity to grow and learn. But if I just say that to someone they don’t get it. But if they experience it, a lot of people who’ve gone without meat for a while, I asked them, “OK, do you miss it?” They’re like, “Yeah, U kind of do.” I’m like, “Well, are you going to keep doing it?” They’re like, “Yeah, I am going to keep doing it.” I don’t want to give it away. I mean you can have your personal experience. But I think that personal experience is a big deal that talk doesn’t reach.
So I’m moving over to my calendar and I wonder if we could schedule a follow up conversation for… You said 30 days. I want to share a couple of things that are the biggest hurdles that people face. One of them is other people. It’s like you know you visit someone and they are like, “Hey, I got this great stake for you” and suddenly you are in this awkward position of like, “If I turn it down, if I… You know, and so I don’t know the solution. Some people say, “I will do absolutely what it takes to stick with what I said.” Some people say, “You know there will be problems, that’s inevitable. It’s all roll with the punches and you know I’m not going to let it end it.” But just I don’t know the solution for you and kind of what the second conversation is for us to find what that is but I want to prepare you that for a lot of people that’s an issue.
The other is travel. When you’re not in your own home territory it can get very difficult. Well, it can or it can’t. It depends on the person and the situation. But I find that it helps people to prepare, to know that these things are going to come. Maybe that you can’t foresee everything but to think of like, “OK, if I go to my mom’s for the holiday and my mom serves me some big steak, how do I handle it?”
And another thing I do is usually say make sure that the goal is a SMART goal. But it seems pretty smart you know smart meaning you know specific, measurable, time sense and all that because I try to prepare people based on having seen bunch people go through this. So we’re set for next time. Is there anything I didn’t think to ask for this one that’s worth bringing up?
Michael: No, I think we really touched by. I really appreciate you know especially the kick off that really led me you know talk about what the book’s all about. So I appreciate that.
Joshua: OK, great. Then I will talk to you in about a month and I just want to add that I read the book. I could’ve put it down but I couldn’t. Like I was like what comes next. And so I’m glad that this book is out there. And also I’m glad to have had this conversation because it did put some context in it that made it make more sense to me after reading it.
Michael: Well, I appreciate it. I appreciate too your comment about how you know the book is academically based but is really trying to go to a broader audience because that really is the intent. And I’m glad that that resonated with you.
Joshua: Yeah. I think you bridged that gap effectively.
Michael: Thank you.
I hope you could tell I enjoyed talking to Michael mentally especially talking about systems because so many people believe in a one-shot approach that one thing will be a silver bullet. And I think he and I agree that progress has to come from lots of different areas. I can’t tell how much he and I differ that he puts a lot of confidence in the markets and technology. I’m not quite sure the difference between his view and mine on the relative amounts but both of us agree work has to come from a lot of areas. I like a lot that he took a challenge about living by his values and something that he likes beef a lot. I suspect that he’s going to learn a lot from that experience and he’ll put more value on the behavioral component. So, I look forward to the second conversation too.
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