Rewiring

the Economy
Ten tasks, ten years

#RewireEconomy

The University of Cambridge Institute for

Sustainability Leadership
For 800 years, the University of Cambridge has
fostered leadership, ideas and innovations that have
benefited and transformed societies. The University
now has a critical role to play to help the world
respond to a singular challenge: how to provide
for as many as nine billion people by 2050 within a
finite envelope of land, water and natural resources,
whilst adapting to a warmer, less predictable climate.
The University of Cambridge Institute for
Sustainability Leadership (CISL) empowers
business and policy leaders to make the necessary
adjustments to their organisations, industries
and economic systems in light of this challenge.
By bringing together multidisciplinary researchers

with influential business and policy practitioners

across the globe, we foster an exchange of ideas
across traditional boundaries to generate new,
solutions-oriented thinking. His Royal Highness
The Prince of Wales is the Patron of CISL and plays
an active role in its work.
A particular strength of CISL is its ability to engage
actors across business, finance and government.
With deep policy connections across the EU
and internationally, dedicated platforms for the
banking, investment and insurance industries,
and executive development programmes for
senior decision-makers, it is well-placed to support
leadership in both the real and financial economies.

Publication details
Copyright 2015 University
of Cambridge Institute for
Sustainability Leadership
(CISL). Some rights reserved.
The material featured in this
publication is licensed under
the Creative Commons
Attribution-NonCommercialShareAlike License.
The details of this license
may be viewed in full at:
http://creativecommons.org/
licenses/by-nc-sa/4.0/legalcode
Disclaimer
The opinions expressed here
are those of CISL and do not
represent an official position
of any of its individual
business partners or clients.

Author and acknowledgements

This report was authored by
Dr Jake Reynolds with support
from an editorial team of James
Beresford, Tony Juniper, Polly
Courtice, Catherine Tilley and
James Cole.
The editorial team wish to thank
CISLs fellows, senior associates,
business platform members,
board and staff who provided
expertise and guidance. Special
thanks go to our alumni and
wider network, over 400 of
whom responded to the initial
draft with their criticism,
feedback and suggestions.
Thanks also to Corporate
Culture Group for the design of
this report and to James Fenton of
Blimp Creative for early concepts.

Reference
Please refer to this report
as Rewiring the Economy
(CISL, 2015).
Copies
This full document can be
downloaded from CISLs website:
www.cisl.cam.ac.uk
Contact
To obtain more information
on the report, please contact
Dr Jake Reynolds:
E: jake.reynolds@cisl.cam.ac.uk
T: +44 (0)1223 768850
July 2015

Rewiring the Economy

Executive summary
Despite many business leaders engaging with their peers, politicians and
policymakers to turn sustainability ambition into practice, inequality is still
rising, ecosystems are being degraded, resources depleted and greenhouse
gas levels are climbing. These trends are detrimental to environments,
communities, businesses and long-term economic performance.
For economies to overcome these challenges there is a
clear need to tilt operating conditions in favour of sustainable
business practice.
Rewiring the Economy is CISLs ten-year plan to lay the
foundations of a sustainable economy1. It is built on ten
interconnected tasks, delivered by three key groups of leaders:
government, finance and business. These tasks (see Figure 1)
are not unique to the plan. Rather, Rewiring the Economy
shows how they can be tackled co-operatively over the next
decade to create an economy that encourages sustainable
business practices and delivers positive outcomes for people
and societies (see Figure 4).

Clearly these fundamental tasks will need to be sensitive

to very different institutional and geographic contexts
around the world. It is our ambition to work with leaders
from across our global network to explore how best to
reflect this, through our focus areas of leadership
development, business model innovation, sustainable
finance and a just transition to a low carbon economy.
Beyond our network, we would like the plan to become a
strategic compass bearing for governments, businesses and
civil society around the world, inspiring new collaborations
and enabling a fundamental change in how the global
economy is harnessed for social and environmental good.

Figure 1: The ten tasks

Task 1: Measure
the right things,
set the right targets
Governments can set
bold targets for social
and environmental
progress, and adopt
new measures to track
how well the economy
is delivering them.

Task 2: Use fiscal

policy to correct
externalities
Governments can
internalise environmental
and social costs in
economic activities
through fiscal policy,
benefitting sustainable
business models.

Task 3: Drive socially

useful innovation
Governments can use
every opportunity to
create drivers and
incentives for innovation
aligned with core
sustainability goals,
and should exemplify
and enable sustainable
business.

Task 4: Ensure capital

acts for the long term
Investors of capital
can demand more
from their money, using
their influence to drive
long-term, socially useful
value creation in the
economy in the interests
of their beneficiaries.

Task 5: Price capital

according to the
true costs of
business activities
Capital providers, and
those who regulate
them, can jointly
consider how to reflect
social and environmental
risk factors in the cost
of capital.

Task 6: Innovate
financial structures
to better serve
sustainable business
Financial intermediaries
in particular can apply
their influence and
creativity to increasing
the flow of capital into
business models that
serve societys interests.

Task 7: Set a bold

ambition, and innovate
to deliver greater value
Companies can
seek models of value
creation that generate
a fair social contribution
within the natural
boundaries set by
the planet.

Task 8: Broaden the

measurement and
disclosure framework
Companies can build
a fuller understanding
of their impacts
(and dependencies)
on society, including
the implications for
capital allocation.

Task 9: Grow the

capability and
incentives to act
Companies can align
their capital, talent and
senior attention with a
sustainable business
vision, and ensure
people are empowered
to deliver.

Task 10: Harness

communications
for positive change
Companies can use
their communications
and marketing
muscle to build public
understanding of
(and appetite for)
sustainable business.

An economy that does not undermine its own capacity to continue through loss of social and environmental value.

1

Rewiring the Economy

Background
2015 is an exceptional year that sees the convergence of a number
of important international agreements on sustainable development,
culminating in the long-awaited climate change summit in Paris in
December. These new frameworks, some of which have been years in
design, are intended to shape economic growth and prosperity long into
the future in order to secure the wellbeing of societies across the world.
In the context of this new regime, business leaders
have an opportunity to work with peers, politicians and
policymakers to make significant advances in taking
sustainability aspiration into practice. While many are
already doing just this, and despite the extraordinary efforts
of pioneers, inequality is still rising, ecosystems are being
degraded, resources depleted and greenhouse gas levels
are still climbing. The Great Acceleration (see Figure 2)
that began in the 1950s remains at full pace, driven by an
economy that has proved its ability to innovate and yet
which is, in fundamental respects, unsustainable, with
necessary reforms discussed but not delivered.2
The current economy shows no sign of maintaining global
temperature rise under two degrees, or addressing key
challenges like inequality or natural resource degradation.
That this is the case reveals a monumental market failure:
current price signals are too weak to change economic
behaviour, despite the costs to society that arise from
business as usual. Thoughtful companies can mitigate their
impacts to a certain degree but, in a competitive market,
investment in public goods has obvious limits. To go further,
business needs to compete on a different playing field.
To respond to this need and seize the opportunities presented
in 2015, CISL decided to harness the insights we have
gathered over a quarter of a century of working with business,
finance and government, along with the wealth of experience
in our network, in the development of a new ten-year plan to
rewire the global economy.
We are setting out to find and exploit the key leverage
points for positive change those places where relatively
modest effort could produce a new paradigm. Two such
points are public policy and financial services, both with
universal influence over business. Together they offer the
alluring and achievable prospect of capital seeking social and

environmental outcomes alongside financial returns.

This is not to say that policy and finance are the only such
influences over business: we recognise that movements
in civil society and cultural change in organisations are
critical drivers of change, as are the efforts of extraordinary
individuals. However this plan concerns the three dominant
actors in the economy: government, finance and business.
If the operating conditions for business were to change the
policy environment, accounting techniques, cost of capital
and business norms of particular industries so too would the
economics of sustainable business. We are confident that this
prospect, combined with the dynamism and innovation that
is typical of business leaders (including many in our network),
could unlock huge positive impacts for societies.
Changing the operating conditions for business will demand
a new quality of relationship between business, finance and
government. Many business leaders are anxious to see this.
An agenda that was in the past driven by civil society is now
widely recognised by companies that believe their supply
chains, markets and stores of trust are at risk without it.
There is of course a healthy debate about how to bring this
transformation about.
Some business leaders believe that bads such as pollution
and the negative impacts of goods and services (carbon,
obesity, scarcity) should be taxed more punitively than
goods like labour and profit. Others favour regulatory
responses or pricing mechanisms to control resource use,
waste, inequality, discrimination, and so on. They see the
challenge as raising the bar on business practices by tilting
the operating conditions in favour of innovations that bring
social and environmental benefits. Others see transparency
as key, and want governments to mandate disclosure of
social and environmental performance to allow stakeholders
to make up their own minds about business behaviour.

Steffen, W., Broadgate, W., Deutsch, L., Gaffney, O. and Ludwig, C. (2014), The trajectory of
the Anthropocene: The Great Acceleration, The Anthropocene Review, 118, January 2015.

2

ibid, map and design: Flix Pharand-Deschnes/Globaia.

Rewiring the Economy

Surface
temperature

-0.2
-0.4
-0.6

140
120
100
80
60
40

Coastal
nitrogen

Billion
Thousand KM3

Thousand dams

2
1
0

1500

800
600

200
0

Methane

100

8.5

30

8.0
7.5
7.0
6.5
6.0

25
20
15

Tropical
forest loss

10

20

Changing the operating

conditions for business
will demand a new
quality of relationship
between business,
finance and government.

80
70
60
50
40
30
20
10
0

20
0

Marine fish
capture

0.2

4
3
2

Shrimp
aquaculture

1
0

0.4
0.3

Stratospheric
ozone

40

500
0

Ocean
acidification

80
60

1000

280

International
tourism

400

2000

Nitrous oxide

Million arrivals

1000

Telecommunications

% loss

340

8
7
6
5
4
3
2
1
0

Water use

Million tonnes

300

Hydrogen ion, NMOL KG-1

0.2

600

250

0.6
0.4

Transportation

Urban
population

5
4

900

% loss (area)

Human N flux, MTON YR-1

Temperature anomally C

270

310

4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0

Domesticated
land

0.1
0

If the operating conditions

for business were to
change so too would
the economics of
sustainable business.

% loss mean species

abundance

330
300

Atmosphere conc., PPB

Atmosphere conc., PPM

Carbon dioxide

Large dams

390

1200

7
6

50

1500

Paper
production

100

360

Fertilizer
consumption

Billion phone subscriptions

400

Million motor vehicles

Million tonnes

100

1.0

Foreign Direct
Investment

Earth system trends

200
150

2.0
1.5

Socio-economic trends

0.5

Atmosphere conc., PPB

Primary
energy use

100

200

20
0

200

300

30

Million tonnes

300

40

Real GDP

% of total land area

400

50

10

600
500

60

Trillion US dollars

World
population

Trillion US dollars

8
7
6
5
4
3
2
1
0

Million tonnes

Exajoule (EJ)

Billion

Figure 2:
The Great Acceleration

40
30
20

Terrestrial
biosphere
degradation

10
0

The Great Acceleration

that began in the 1950s
remains at full pace.

Rewiring the Economy

What should the

economy be delivering?
Today, business is regarded by governments
primarily as an engine of economic growth.
While private enterprise can excel at delivering
that growth, there is a problem.
It is not difficult to imagine actions for business, government
and finance leaders to address this, but one first needs to
ask what economic activity is designed to achieve. There are
many answers to that question, most based in the betterment
of peoples lives, with a healthy environment implicit in that
objective. Emerging global frameworks such as the United
Nations Sustainable Development Goals (SDGs)4 break this
down in more detail: ending poverty; education and health for
all; dealing with climate change, and so on.

In their present form, the SDGs are broadly defined, in

some cases overlapping, and not immediately translatable
into business action. Moreover they cannot be delivered in
isolation. It would be hard to imagine ending poverty in all its
forms everywhere, for example, being delivered separately
to goals on education, health, energy, water and climate
change. We have therefore condensed the SDGs into six
broad areas of ambition that we hope will resonate with
business, (see Figure 3).

It is notable that the success of economies is generally

measured in terms of growth rather than positive outcomes
for people, such as those embodied in the SDGs. Clearly
some growth will contribute to some of the SDGs, some of
the time, but there are no guarantees. We also know that
much economic activity does not contribute to the SDGs,
and may in fact undermine their delivery. There seems to be
a strategic chasm between where the world agrees it should
be headed (the SDGs) and the direction of the economy.
The sooner the economy is harnessed for social and
environmental gain, the sooner that chasm can be bridged.

Governments have cited the central role of business in

delivering these goals, but they cannot realistically expect
that to happen unless they are prepared to establish ground
rules that enable economic activity to generate social and
environmental value. The dynamic between business,
government and the finance system therefore lies at the
core of this initiative. We believe that in an appropriately
guided economy, business can be an engine of sustainable
development, not just economic growth, dealing with
challenges such as poverty and climate change as a
function of doing business.

Much economic activity

does not contribute to the
SDGs, and may in fact
undermine their delivery.

Rewiring the Economy

Figure 3:
What the economy should be
delivering: six broad social and
environmental ambitions
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Sustainable Development Goals

For the last fifteen years the Millennium Development
Goals have provided an overarching framework for global
development. When they expire in September 2015 they will
be replaced by the Sustainable Development Goals (SDGs).
Condensed from the ambitions of almost 200 governments
and shaped further by business and civil society, the SDGs
represent a once in a generation statement of direction for

http://sustainabledevelopment.un.org

4

the whole world, guiding the global agenda for the next
decade and longer.
The SDGs break down a seemingly overwhelming challenge
into seventeen parts, which CISL has condensed further
into six. For business to become an engine for the delivery
of the goals they must now be turned into a practical agenda,
which is the purpose of the Rewiring the Economy initiative.

Rewiring the Economy

The plan
The question is how do we put these ambitions
into practice? Business thrives on a clear long-term
plan. To this end we have developed a ten-year
plan to empower our network to lay the foundations
for a sustainable economy one that is capable
of achieving these ambitions.
5

The plan focuses on creating the enabling conditions for

sustainable business: the conditions that, if present, would
encourage capital to flow into sustainable business
models 6 on the basis of their superior risk and return.
The vision of the plan is to lift and tilt the playing field for
business such that, over time, the economy generates
positive outcomes for people within safe environmental
boundaries. This is an opportunity for business, government
and finance leaders to work together on a common, jointly
beneficial agenda. If we succeed, the next decade will lay the
foundations for a bright future in which humankind thrives.
The process of transformation will require greatly increased
levels of ambition, new forms of collaboration and radical
innovation to escape the thinking that is holding us back.
There will be few instant wins, which is why this plan is set
out over ten years, embracing short, medium and longer term
actions of a fundamental nature.
The plan is built on ten interdependent tasks, delivered
by three key groups of leaders: government, finance and
business. These tasks are not unique to the plan work
is underway across the world to address these enablers
of change, though in many cases it is too fragmented
and suboptimal in scale to achieve the desired impact.

This is an opportunity for business,

finance and government leaders
to work together on a common,
jointly beneficial agenda.

The plan shows how these tasks can be tackled

co-operatively to encourage business practices that
deliver the sustainable development goals (see Figure 4).
Building a sustainable economy requires the creativity
and determination of business, finance and government
leaders. Rewiring the Economy calls for a step up in this
process. It is a catalyst for change, requiring extensive
and diverse collaboration over the next decade to deliver
its aims.
Clearly these fundamental tasks will need to be sensitive
to very different institutional and geographic contexts
around the world. It is our ambition to work with leaders
across our global network to explore and learn how to
achieve this, through our focus areas of leadership
development, business model innovation, financial system
reform and a just transition to a low carbon economy.
Read more about working with CISL on pages 1516.
Beyond our network, we would like the plan to
become a strategic compass bearing for governments,
businesses and civil society, inspiring new collaborations
and enabling a fundamental change in how the global
economy is harnessed for social and environmental good.

Rewiring the Economy is a catalyst

for change, requiring extensive
and diverse collaboration over
the next decade to deliver its aims.

Rewiring the Economy

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and universal healthcare and education lie beyond the control of business.

5

Business models that produce positive social and environmental outcomes alongside financial returns.

6

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Figure 4:
Ten tasks for business, finance and
government to lay the foundations
for a sustainable economy

Rewiring the Economy

The ten
tasks

Tasks for government

Governments set the
rules of an economy,
steering its development.
Their role in building a
sustainable economy
is simple: provide the
signals and conditions
necessary to adjust
economic behaviour, a
responsibility that takes
in government policy,
regulation, spending and
public service practice.
Three shifts, supported
by finance and business
leaders, are needed to
achieve this.

Task 1:
Measure the
right things,
set the right
targets
Governments can set bold targets for social and
environmental progress, and adopt new measures
to track how well the economy is delivering them.
Many policies are geared toward growing GDP without
sufficient regard to the quality of the growth achieved.
Such a limited strategy can be counterproductive
in terms of meeting social and environmental goals.
Governments should consider how well they are
served by GDP, and whether their goals and strategies
may have been distorted as a result of its ubiquitous
application. New metrics that integrate changes in
social and natural capital alongside economic output
provide a more rounded view of economic progress.
Measurement is only one part of this story, the other
being the targets that governments set on the basis of
the metrics they agree. Clear, measurable commitments
from governments are essential in areas such as binding
carbon emissions targets, achieving or surpassing zero
net waste, and rules and incentives to achieve zero net
deforestation, integrated with goals relating to skills,
employment and living standards.
Without clear targets, backed up by integrated
measurements, legal mandates and political
commitment, then other government actions
for example social and environmental policies
will continue to work against the grain of the economy
rather than through it, producing mixed messages
for business.

New metrics that integrate

changes in social and
natural capital alongside
economic output provide
a more rounded view of
economic progress.

Rewiring the Economy

Task 2:
Use fiscal
policy to correct
externalities

Task 3:
Drive socially
useful
innovation

Governments can internalise environmental and

social costs in economic activities through fiscal
policy, benefiting sustainable business models.

Governments can use every opportunity to

create drivers and incentives for innovation
aligned with core sustainability goals, and can
exemplify and enable sustainable business.

Novel fiscal policies are required to ensure that the

true costs of environmental and social externalities
are borne by the economy rather than being offloaded
on society. Examples of externalities include carbon
emissions, various forms of pollution and waste,
resource depletion, ecosystem loss and a wide range
of social inequalities. This task could be tackled, for
example, by differentially taxing business activities
according to their environmental and social impacts
and rewarding positive performance. An example of
this approach would be the use of revenues raised
from carbon pricing to enable private financing of
low carbon, climate resilient infrastructure.
Another powerful way to reflect and manage true costs
is to remove or redirect subsidies that otherwise make
unsustainable economic activity cheaper, for example
in relation to fossil fuels, soil damage, biodiversity loss
or the perpetuation of poverty. Governments should
consider whether their current approach to subsidies
may in fact be encouraging economic activities that run
counter to sustainable development goals.
Are governments using fiscal policy to correct market
failures that prevent business from delivering socially
useful goods and services? Are governments setting a
carbon price that reflects the full economic risks posed
by climate change?

Governments should
consider whether their
current approach to
subsidies may in fact be
encouraging economic
activities that run
counter to sustainable
development goals.

There is a clear need for innovative approaches,

technologies and systems to tackle the fundamental
sustainability challenges facing the world. Government
has a central role to play in driving and sustaining such
innovation. There is no better way for governments to
demonstrate their commitment to building a sustainable
future than to use regulation, public spending and other
policy instruments consistently to achieve this aim.
Public procurement, service delivery, planning policy,
education, research funding, innovation support
and other levers of industrial (and infrastructure)
policy can all be harnessed to enhance public
goods such as living conditions, employment,
public space and environmental quality. At a
minimum, government activities should not be
associated with undesirable outcomes such as
low pay, excessive waste creation, or damage to
important and vulnerable ecosystems, landscapes,
communities and the climate. At best, government
activities can be a powerful lever for change.
Are governments effective at driving innovation?
Are they aligning efforts to drive and support
innovation with their sustainability goals?

Are governments aligning

efforts to drive and support
innovation with their
sustainability goals?

10

Rewiring the Economy

The ten
tasks

Tasks for finance

If governments steer the
economy then finance
provides its fuel. As a
universal influence on
business, the role of
finance in rewiring an
economy is simple: to
steer capital towards
economic activities that
support the future we
want, and away from
activities that do not.
Three collective shifts
are necessary.

Task 4:
Ensure capital
acts for the
long term

Investors of capital can demand more from their

money, using their influence to drive long-term,
socially useful value creation in the economy in the
interests of their beneficiaries.
In broadening their expectations on capital, investors
can reward companies for incorporating long-term
risk and value creation in their business models.
Expectations can be set and reinforced in numerous
ways. These include the agreements established
between different intermediaries in the financial value
chain, shareholder votes on policies that do or do
not align with long-term value creation (such as
remuneration and environmental performance), and
the tools used to translate future business opportunities
into present-day value.
Extending the timeframe over which financial risks
and returns are modelled, and opening the analysis to
key environmental, social and governance (ESG) risk
factors, will build alignment between the way capital is
deployed and the interests of its ultimate beneficiaries
the public.
This big and urgent reform faces an uphill climb
against a well-known culture of short-termism in the
finance sector, and warrants action from governments,
regulators, capital owners, financial intermediaries,
consultants, risk experts and business.
What would it take to incentivise the financial value
chain to seek long-term performance?

What would it take to

incentivise the financial value
chain to seek long-term
performance?

Rewiring the Economy

11

Task 5:
Price capital
according to
the true costs
of business
activities

Task 6:
Innovate financial
structures to
better serve
sustainable
business

Capital providers, and those who regulate them,

can jointly consider how to reflect social and
environmental risk factors in the cost of capital.

Financial intermediaries in particular can apply

their influence and creativity to ramping up the
flow of capital into business models that serve
societys interests.

The cost of capital is a key factor in business decisionmaking. It is influenced by multiple drivers that interact
with one another, including the business strategies of
individual capital providers and the requirements set by
regulators. Ultimately, the assessment of risk and return
that underpins cost of capital calculations dictates how
capital is deployed and hence which business activities
are able to flourish.
Today, the cost of capital rarely reflects the true costs of
business activities across equity, debt and insurance. This
means that one of the key drivers of business decisionmaking is at best sending unhelpful signals to companies,
and at worst allowing important risks to society to
accumulate in the longer term. This danger is already being
recognised by some central banks and financial regulators,
who, for example, are asking whether the by-products of
unsustainable economic activity, such as climate change
and income inequality, could threaten financial stability.
Some individual capital providers are identifying strategies
that enable them, on a unilateral basis, to reflect more
closely the true costs of business activitiesin their cost
of capital. For example, some banks require customers
to meet certain environmental, social and governance
(ESG) standards as a condition of business, while some
investors integrate these considerations into their asset
choices. These efforts need to be brought front and centre
of financial institutions thinking, enabled as necessary by
fiscal, monetary and regulatory interventions.
Though they are regarded by some to be simply good risk
management, how consistently are they being applied, and
how visible is this to business?

The cost of capital rarely

reflects the true costs of
business activities across
equity, debt and insurance.

In recent decades financial intermediaries, such as

banks, have demonstrated incredible creativity in
extracting financial value from business and society,
to the point where many stakeholders now regard
them as an economy in their own right, serving their
own purposes rather than the underlying needs of the
real economy that others inhabit.
It is critical that this same powerful instinct for innovation
is now underpinned by social purpose. Business models
that address societys essential needs are emerging all
the time. In many instances, the companies that invent
them struggle to access mainstream capital because
the risks are perceived by financial intermediaries to be
too high or the scale of their operation too small take
off-grid renewable energy in Africa. They find themselves
reliant on government or donor capital, or turn to
unconventional sources, which can make their growth
more costly, slow or even not possible yet they are
almost certainly bright prospects for the future.
More work is required by institutions across the financial
value chain, governments and businesses to understand
how innovative financial services, including public-private
financing structures, could be deployed to support and
scale up sustainable business models. Patient capital,
risk-sharing mechanisms, innovation support and
capability building are all part of a rich picture of financial
services that will fuel a new generation of businesses
that contribute to global challenges such as poverty,
inequality and climate change. It will also help the
incumbents to grow in new, socially relevant, ways.
Could an improved understanding of this transition
enable financial intermediaries to better support
their clients?

Businesses that address

societys changing needs are
almost certainly the brightest
businesses of the future.

12

Rewiring the Economy

The ten
tasks

Tasks for business

If finance is the fuel
of an economy, then
business is its engine.
Any serious rewiring
of an economy must
therefore be based on full
business engagement
and leadership. We
present four strategic
enablers that business
can progress with
government, financial and
educational institutions.

Task 7:
Set a bold
ambition,
and innovate
to deliver
greater value
Businesses can seek models of value creation that
generate a fair social contribution within the natural
boundaries set by the planet.
We know that for many businesses, the current operating
model isnt going to be sustainable in the long term, and
companies will have to transform their value-creation
system. This will, for example, require sustainable production
methods for agricultural commodities, circular manufacturing
and consumption models, blends of product and service
approaches, and a revolution in the energy system.
The shift business needs to make is dramatic and multiyear. It will be incredibly challenging for many companies,
and unlikely to happen without clear aspirations and a
strong imperative for change. For many companies it will
mean working differently with partners and suppliers, and
understanding the full lifecycle of their products and services.
For incumbent players, this level of disruptive innovation
is challenging, and is likely to lead to the rebalancing of
corporate portfolios.
As is the case with governments, robust measures and
targets, aligned with the UNs Sustainable Development
Goals (SDGs), will be required to drive execution, alongside
investment in strategy, R&D and corporate venture capital.
Parallel innovation will be needed from the financial sector
to provide capital, and from governments to set the right
enabling conditions.
Companies will need to consider how value can be
created while making a fair social contribution with neutral
or positive impacts on the natural world. Is their strategy
consistent with maintaining global temperature rise under
2C, with a fair distribution of earnings between tax and
profit? Do all staff and workers through the supply base
receive at least a living wage?

Companies will need to consider

how value can be created while
making a fair social contribution
with neutral or positive impacts
on the natural world.

Rewiring the Economy

13

Task 8:
Broaden the
measurement
and disclosure
framework

Task 9:
Grow the
capability and
incentives
to act

Companies can build a fuller understanding

of their impacts (and dependencies) on society,
including the implications for capital allocation.

Companies can align their capital, talent and

senior attention with a sustainable business vision,
and ensure people are empowered to deliver.

Business leaders say they must measure what they

seek to manage. In recognition of this basic assumption,
companies need to understand new facts about their
business: the real rates at which the resources they use,
such as water, soil, biodiversity and clean air, are being
depleted; the actual risks their business is exposed to
from market failures such as climate change; and the true
impact of their operations on society. Companies can
achieve this by adopting new standards for three major
groups of decisions: financial accounting, management
accounting and capital allocation.

In any fast-moving transition, the ability to learn and

adapt is critical. In this case, companies can build their
capability by educating and empowering individual
leaders, organisations and wider industries to take
a longer, broader view of value creation consistent
with sustainable business success. This will involve
purposefully reallocating capital, talent and senior
attention from current models towards the allocation
required to deliver on sustainable business ambitions.

By working with the accounting community to broaden

the use of environmental, social and governance (ESG)
reporting, companies can send a clear message to
capital markets about their longer term approach to
value creation. By accounting for natural capital,
companies can develop a clearer appreciation of the
true lifetime costs of their goods and services and make
informed decisions about how to manage them. Finally,
by building a true appreciation of the real costs of capital
and lifetime risk profile of an investment, companies can
enhance their capital allocation processes.
The transparency resulting from integrated reporting
and disclosure by listed companies (as well as large
private companies and public institutions) will facilitate
a more informed dialogue with stakeholders about
the role of business in meeting societal challenges.

Resource allocation is notoriously sticky in most

organisations, and there is evidence that active
reallocators outperform the market. This is an important
capability for organisations to build. Companies
will benefit from increasing their human capital and
developing the people and skills to operate in new ways
that are consistent with sustainable business success.
Incentives matter and companies of all kinds
including in the financial sector can review their
reward and recognition schemes to ensure that
managers are not facing perverse incentives
to preserve the status quo, and are effectively
rewarded for long-term, sustainable performance.
A simple test: is sustainability good for your career?

What is the net contribution of a company, and how

is it handling trade-offs?

Companies can send a clear

message to capital markets
about their longer term
approach to value creation.

Companies will benefit

from developing the
people and skills to operate
in new ways that are
consistent with sustainable
business success.

14

Rewiring the Economy

The ten
tasks

Tasks for business

Task 10:
Harness
communications
for positive
change
Companies can use their communications and
marketing muscle to build public understanding
of (and appetite for) sustainable business.
A significant proportion of the information citizens
and governments receive is via the communications,
marketing and public relations undertaken by business.
These powerful influences could be used to help
stakeholders across civil society see why sustainable
business makes sense, why a sustainable economy is
not only critical for survival but a great place to live and
do business. Our popular culture is based in large part
on our relationships with brands. If those relationships
could be harnessed for sustainability, then the shifts
the world needs to make will be more likely to occur.
Marketing and communications professionals,
as well as public affairs experts, have a vital role to play
in building awareness and engaging in an informed
debate about sustainability. Key starting points are
customers, suppliers, investors, regulators, and the
business schools that train the future employees of
the firms concerned.
Given what is at stake for business in the transition to a
sustainable economy, this is no time for greenwash. Not
all stakeholders including governments are currently
on board with the challenges, or pedalling hard to find
solutions. Deploying corporate influence for positive
policy and cultural change is an essential characteristic
of a sustainable business. For example, how does a
company show its investors that it is making capital
work in the long term? And how is it communicating the
need for effective enabling policies to governments?

Marketing and communications

professionals, and public
affairs experts, have a vital
role in building awareness
and engaging in an informed
debate about sustainability.

Rewiring the Economy

15

Laying the foundations for

a sustainable economy will
require widespread and
long-term commitment to
collaborative action
Making progress on sustainability over the next decade will require
the creativity and determination of business, finance and government
leaders, all working together. Adapting and implementing the tasks
within Rewiring the Economy will be challenging for any organisation,
regardless of its scale or the scope of its sustainability ambition.
The University of Cambridge Institute for Sustainability
Leadership (CISL) is committed to working with leaders
from business, government and finance, and work is
already underway on many of the tasks outlined in the
plan. Rewiring the Economy helps connect the dots so
that we can see how these efforts add up to put us on a
path to a sustainable economy.

A unique partner
CISL is a unique partner in this process. We bring academic
rigour to bear on business and policy problems and translate
findings into actionable steps. We have the ability to convene
across boundaries and create space to initiate difficult
conversations and help stakeholders co-create solutions.
We see our role in Rewiring the Economy as follows:

Convening leaders and groups of companies

with a common commitment to change and a
desire to achieve things collaboratively that they
cant achieve on their own
Building leadership capacity through executive
and graduate education
Undertaking applied and fundamental research
to build the knowledge base
Working with individual companies at a strategic
level to support transition
Enabling our active network of organisations
and individuals to champion change

We will measure our impact by our ability to catalyse the

ten tasks outlined in this plan. In short, how effectively we
contribute to rewiring the economy.
We believe our strengths lie in four strategic areas:
Building leadership capacity for systemic change
Building on 25 years experience working with leaders,
CISL is developing new approaches to leadership across
business, finance and policy. To rewire the economy we
must recognise the capabilities, knowledge and mindsets
that are required to lead this change.
For example: The Prince of Waless Business & Sustainability
Programme and our customised programmes for companies
convene senior executives to engage and empower leaders
to act. Graduate qualifications and online learning tools build
capacity and specific skills in individuals and organisations.
Business model innovation
Much of the current literature on business model innovation
is dominated by niche, small scale or start-up case studies.
We work to build the evidence, co-create solutions and
develop new tools to enable incumbent businesses to
achieve a step change in practical approaches to reconciling
profitability and sustainability.
For example: The Natural Capital Leaders Platform helps
progressive companies develop practical tools for businesses
to value, measure and manage their opportunities from,
and impacts on, natural capital. Our Leadership Labs bring
together practitioners and executives to learn more about
business model innovation.

16

Rewiring the Economy

Laying the foundations for a sustainable

economy will require widespread and
long-term commitment to collaborative
action continued

A just transition to a low carbon economy

We support the engagement of leaders across sectors to
work collectively and individually to develop pathways to
transition and to unlock structural transformations in the
economy that cut and ultimately eliminate carbon emissions
while addressing the social implications of transition.
For example: The Prince of Waless Corporate Leaders
Group (CLG) is a group of business leaders convened
by CISL to advocate for low carbon transformation with
global policymakers. We are committed to working with
difficult to deal with sectors such as extractives and
energy intensives to support their pathways to transition.
A sustainable financial system
We work with financial institutions, regulators and
corporate finance professionals to support change by
clarifying future risk and value, setting new business
norms and facilitating dialogue with real economy partners.
For example: The Banking Environment Initiative,
ClimateWise (for insurers) and the Investment Leaders
Group bring together leaders across the finance sector
to take action in their own industries and work with
leaders in other parts of the economy. We currently
work with several financial services organisations to
build their leadership capacity through customised
programmes of work.

Over to you
We are looking to our extensive and diverse network of leaders
to take action and share their insights into the challenges and
opportunities they encounter along the way, and wherever
possible to collaborate with us over the next decade to deliver
this plan.
We invite you to look at your own organisation, at your own
niche in the economic system, and consider what it would
take for you and your peers to play a part in delivering against
these ten tasks. Above all, we are looking to you to take action.

We are committed to joining

you on that journey.

Cambridge insight,
policy influence,
business impact
The University of Cambridge
Institute for Sustainability
Leadership (CISL) brings together
business, government and
academia to find solutions to
critical sustainability challenges.
Capitalising on the world-class,
multidisciplinary strengths of the
University of Cambridge, CISL
deepens leaders insight and
understanding through its executive
programmes; builds deep, strategic
engagement with leadership
companies; and creates opportunities
for collaborative enquiry and action
through its business platforms.
Over 25 years, we have developed
a leadership network with more
than 6,000 alumni from leading global
organisations and an expert team of
Fellows, Senior Associates and staff.
HRH The Prince of Wales is the
patron of CISL and has inspired and
supported many of our initiatives.

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