Changing our Banks & Business Types to be more Sustainable
We sat down to reimagine traditional economy questions at the Sustainable Brands Conference.
“We are at the beginning of mass extinction, and all you can talk about is money and fairy tales of eternal economic growth.”– Greta Thunberg, UN Climate Action Summit, September 2019
Wise beyond her years at age 16, Greta has a point. Our economic growth and role as a world leader have come at a great cost: on our ecosystem, natural resources, and carbon resources. Many are waking up to this dilemma.
So how on earth can we reconsider our economic model? We found one organization at the Sustainable Brands New Metrics conference in Philadelphia trying to swap mindsets from an endless financial accumulation with a satisfying life, happiness, and well-being.
We sat down with Donnie Maclurcan, Executive Director of the Post Growth Institute, an international group exploring and inspiring paths to global prosperity that don’t rely on economic growth.
(This interview has been edited for clarity and length.)
Green Philly: What brings you to the New Metrics conference?
Donnie Maclurcan: I’m at New Metrics to explore how the conversation is moving forward in regards to what might come next for the economy and its relationship with sustainability, particularly through business models. We’re seeing shifts around more deeply sustainable business models gaining competitive advantage in the marketplace.
Green Philly: Which business models are gaining a competitive advantage?
Donnie Maclurcan: If we can imagine that in the past, the joint-stock corporation was the dominant business model and we’ve seen that shift over the last few years to triple bottom line (aka benefit corporation models) taking greater market competitiveness.
We think that that shift is going to continue through models such as employee-owned businesses, producer cooperatives, and then ultimately through the not for profit forms of business that make up, according to our research, almost 20% of global GDP.
When I say not for profits include consumer cooperatives, government enterprises, foundation owned businesses and nonprofits that have business models underneath them. It’s usually misunderstood that most people around the world think of nonprofits as charities. The reality is that a very small percentage of global nonprofit funding – less than 20% – comes from philanthropic sources. So nonprofits went into business over the last 20 or 30 years. For us, that’s a really exciting avenue to explore in terms of the sustainability impacts when you see money circulating through the economy with profits recirculating through business.
Green Philly: Traditionally, consumers tend to associate for-profits only about the bottom line versus non-profits with a “good” mission, with low-wages and operating budgets. How are these perceptions shifting?
Donnie Maclurcan: It’s been a lot of helpful shifts in the last few years for a lot of unhelpful misperceptions. In a for-profit business, as you mentioned, people are shifting to understand the rising ability for businesses to consider purpose and mission in what they do. I mean, B Corp certification has really helped. We’re seeing even here at Sustainable Brands, companies that are interested in not just doing CSR but going for a much deeper connection between the philanthropy arms of companies and the companies themselves.
At the same time, there’s been a slow, but I think an important, shift in understanding around nonprofits and the rise of revenue generation strategies. People with for-profit corporate backgrounds come in on boards of directors and are often surprised to find that the nonprofits have revenue-generating activities happening.
There’s still a lot of misunderstanding because the word nonprofit often gets confused, with what we describe, as not-for-profit in the US 501(C)3, a tax code. We define not-for-profit as any entity that is engaging the majority of its revenue from market transactions, goods and services yet without any private individual equity owners. And that’s quite a broader school than just nonprofits.
When you think of REI, the Guardian newspaper, Ikea, these sorts of organizations and combine them in with the YMCA, which is really running a business,, that kind of model is new for people in terms of associating that with the words not for profit. It has a really interesting sustainability face, not just in terms of the footprint and the way that these organizations are governed, but also because in those institutions, the money flows through the real economy much more fluidly than in the for-profit sphere.
And that actually has an impact in terms of consumption in the way that inequality is often a driver of over-consumption in terms of status envy, and emulative consumption. So there are some bigger holistic questions to ask there that are coming up.
Green Philly: Earlier today, you were talking about the importance of supporting local credit unions versus big banks. Why does this matter?
Donnie Maclurcan: There are a number of businesses that have approached us that would love to move their banking out of the big four and over to a credit union. But the problem is the credit union just doesn’t provide things like armored vehicle services, ACH payments, etc.
We did an analysis of credit union capabilities. Sure enough, while credit unions have gone much more into the business field over the last 15 years, especially as their membership requirements have opened up, they’ve stopped at a level of semi-comprehensive services. So if you’re a middle-sized company, chances are a credit union can’t meet all of your needs.
There’s a knowledge gap about why this happens, although our early findings found that the credit unions were saying the demand wasn’t there and the businesses were saying the supply wasn’t there. However, we’ve got early indications in our work with a credit union think tank that the interest could then be sparked and could see potentially trillions of dollars moved out of wall street and over into localized banking.
Green Philly: Why is local banking important?
Donnie Maclurcan: Local banks are important because of what’s called the money multiplier effect. Consider buy local campaigns, with the majority of money circulating through the local economy.
It’s the same thing with credit unions. Credit unions are not-for-profit institutions in the US, where they don’t have any private individual owners. They have members, we call owners in a nominal sense.
Every time you’re putting money in or into a credit union or it’s making a profit, the profit just goes back in. So you see large philanthropy associated with credit unions, better loan rates, and better rates in terms of investment returns for your deposit. That’s all-around a good thing for local communities. And it’s why we also think that there’s a really interesting opportunity here for small to medium and even larger businesses to move their money to credit unions in terms of what it can keep in the local economy.