Doughnut Economics in business design

Erinch Sahan, business and enterprise lead at Doughnut Economics Action Lab, explains why regenerative and distributive enterprise design is the next frontier for business

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Published: 9 May 2022

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This article first appeared in our Earth Day 2022 issue of My Green Pod Magazine, printed on 22 April 2022. Click here to subscribe to our digital edition and get each issue delivered straight to your inbox

The climate crisis, spiralling inequality, entrenched poverty, mass extinction – the crises of the 21st century are mounting.

Rising to these challenges will require some rapid transformations across business – so how do we achieve them?

Across sectors and geographies, a slew of initiatives and approaches has been put in place – some are designed to shift the mindset of business leaders while others focus on consumer and investor action, new regulations, stronger unions and effective impact measurement to set better targets for businesses to meet.

We need all these pieces of the puzzle to work together, but we also require a revolution in the way business is designed: a transformation that is structural.

What is enterprise design?

Machines operate according to the parameters of their design. Buildings function and create benefits for their inhabitants based on the way they’re designed.

Similarly, what’s possible for a business is largely determined by how it has been designed.

The design of an enterprise shapes its priorities, how it engages with its surroundings and navigates decisions, who has power and voice when it comes to making decisions and where it invests and channels its profits.

In other words, its purpose and networks, how it is governed and owned and the nature of its relationship with finance.

The ‘Purpose, Networks, Governance, Ownership, Finance’ framework we’re using at Doughnut Economics Action Lab, inspired by the work of Marjorie Kelly, describes the design traits of business.

When business meets the Doughnut

Doughnut Economics is a compass for human prosperity in the 21st century. It highlights the transformations needed if we are to meet the needs of all people within the means of the living planet.

Doughnut Economics recognises that human behaviour can be nurtured to be cooperative and caring, just as it can be competitive and individualistic.

It calls for turning today’s degenerative economies into regenerative ones, and divisive economies into far more distributive ones. So what happens when business meets the Doughnut?

Inevitably, any business engaging with Doughnut Economics is challenged to embrace a range of practices that are regenerative. This includes moving towards zero-waste production and embracing the circular economy.

Critically, Doughnut Economics also challenges businesses to be distributive in their practices – sharing value and opportunity much more equitably with all those who create it.

This means paying at least a living wage, paying fair taxes and sharing success – and even decision-making – with workers.

Some of the best examples are when the regenerative and distributive come together or, for example, when communities create their own renewable energy cooperatives to achieve affordable and renewable energy.

Bucking the trend

There are many positive practices in place that we want to incentivise, encourage and build across the business world. None are perfect, but all buck the trend of their industry: modular phones such as the Fairphone instead of built-in obsolescence, long-term commitment to workers – such as the employee ownership model at Richer Sounds – instead of zero-hour contracts.

So what enables all this? What is in the design of these enterprises that allows the pursuit of regenerative and distributive goals?

For Richer Sounds, becoming employee owned locks in the company’s commitment to its workers. For Fairphone, raising finance through crowdfunding and impact investment supports the company’s investment in modular product design.

Transforming business

The idea of alternative business structures is not new. A range of business forms has existed for as long as businesses have, including ownership by churches, not-for-profit organisations, clubs, foundations, universities, communities and more.

Throughout history, these have served as alternatives to the idea that business exists primarily to create maximum profit in order to grow the private wealth of its owners.

Recently, new ‘designs’ – such as social enterprise, platform cooperatives, benefit corporations and steward ownership – have emerged to join the centuries-old cooperative model, the inspiration for many emerging models of enterprise design.

In order to standardise and regulate these models, some have spawned legal forms or certification.

The diversity of existing models demonstrates that the possibilities of enterprise design are endless.

What’s needed now is an explosion of innovation and creativity in new enterprise designs, each tailored around the impact priorities and challenges of individual businesses.

We are at the cusp of a revolution in how business is structured and we need leaders, citizens and policy-makers to focus on transforming the deep design of business.

If we channel our cooperative and caring nature as humans into the way we design enterprises, we can unlock a business world that helps us overcome the daunting challenges of the 21st century.

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