Rewiringthe Economy Ten tasks, ten years#RewireEconomyFor 800 years, the University of Cambridge has fostered leadership, ideas and innovations that have benefted 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 fnite 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 infuential 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, fnance 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 fnancial economies.The University of Cambridge Institute for Sustainability LeadershipPublication detailsCopyright 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-NonCommercial-ShareAlike License.The details of this license may be viewed in full at: http://creativecommons.org/licenses/by-nc-sa/4.0/legalcodeDisclaimerThe opinions expressed here are those of CISL and do not represent an ofcial 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 staf 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).CopiesThis full document can be downloaded from CISLs website: www.cisl.cam.ac.ukContactTo obtain more information on the report, please contact Dr Jake Reynolds:E:jake.reynolds@cisl.cam.ac.ukT:+44 (0)1223 768850 July 2015Rewiring the Economy 1Despite 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.1An economy that does not undermine its own capacity to continue through loss of social and environmental value.Executive summaryFor economies to overcome these challenges there is aclear 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, fnance and business. These tasks (see Figure 1)are not unique to the plan. Rather, Rewiring the Economyshows 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 peopleand societies (see Figure 4).Clearly these fundamental tasks will need to be sensitive to very diferent 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 refect this, through our focus areas of leadership development, business model innovation, sustainable fnance and a just transition to a low carbon economy.Beyond our network, we would like the plan to become astrategic compass bearing for governments, businesses andcivil society around the world, inspiring new collaborationsand enabling a fundamental change in how the global economy is harnessed for social and environmental good.Task 1: Measurethe right things, set the right targetsGovernments can set bold targets for social and environmental progress, and adopt new measures to track how well the economyis delivering them.Task 2: Use fscal policy to correct externalitiesGovernments can internalise environmental and social costs in economic activities through fscal policy, beneftting sustainable business models.Task 3: Drive socially useful innovationGovernments 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 termInvestors of capital can demand more from their money, using their infuence to drive long-term, socially useful value creation in the economy in the interests of their benefciaries.Task 5: Price capital according to the true costs of business activitiesCapital providers, and those who regulate them, can jointly consider how to refect social and environmental risk factors in the cost of capital.Task 6: Innovate fnancial structures to better serve sustainable businessFinancial intermediaries in particular can apply their infuence and creativity to increasing the fow 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 frameworkCompanies 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 actCompanies 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 changeCompanies can use their communications and marketing muscle to build public understanding of (and appetite for) sustainable business.Figure 1: The ten tasksIn the context of this new regime, business leaders have an opportunity to work with peers, politicians and policymakers to make signifcant advances in taking sustainability aspiration into practice. While many are already doing just this, and despite the extraordinary eforts 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.2The 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 diferent playing feld.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, fnance 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 fnd and exploit the key leverage points for positive change those places where relatively modest efort could produce a new paradigm. Two such points are public policy and fnancial services, both with universal infuence over business. Together they ofer the alluring and achievable prospect of capital seeking social and environmental outcomes alongside fnancial returns. This is not to say that policy and fnance are the only such infuences over business: we recognise that movements in civil society and cultural change in organisations are critical drivers of change, as are the eforts of extraordinary individuals. However this plan concerns the three dominant actors in the economy: government, fnance 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 confdent 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, fnance 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 proft. 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 benefts. 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.Background2015 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.2Stefen, W., Broadgate, W., Deutsch, L., Gafney, O. and Ludwig, C. (2014), The trajectory ofthe Anthropocene: The Great Acceleration, The Anthropocene Review, 118, January 2015.3 ibid, map and design: Flix Pharand-Deschnes/Globaia.Rewiring the Economy 2Figure 2:The Great Acceleration3Rewiring the Economy 3Billion012345678WorldpopulationTrillion US dollars0102030405060Real GDPTrillion US dollars00.51.01.52.0Foreign DirectInvestmentBillion00.51.01.52.02.53.03.54.0UrbanpopulationMillion tonnes0100200300400PaperproductionMillion motor vehicles030060090012001500TransportationBillion phone subscriptions012345678Tele-communicationsMillion arrivals02004006008001000InternationaltourismExajoule (EJ)0100200300400500600Primaryenergy useMillion tonnes050100150200FertilizerconsumptionThousand dams01234567Large damsThousand KM3012345Water useAtmosphere conc., PPM270300330360390Carbon dioxideAtmosphere conc., PPB250280310340Nitrous oxideAtmosphere conc., PPB0500100015002000Methane % loss020406080100StratosphericozoneHuman N fux, MTON YR-1020406080100120140Coastalnitrogen% loss (area)051015202530Tropicalforest loss% of total land area00.10.20.30.4Domesticatedland% loss mean speciesabundance010203040TerrestrialbiospheredegradationTemperature anomally C-0.6-0.4-0.200.20.40.6SurfacetemperatureHydrogen ion, NMOL KG-16.06.57.07.58.08.5OceanacidificationMillion tonnes01020304050607080Marine fishcaptureMillion tonnes01234ShrimpaquacultureChanging the operating conditions for business will demand a new quality of relationship between business, fnance and government.If the operating conditions for business were to change so too would the economics of sustainable business.The Great Acceleration that began in the 1950s remains at full pace.Socio-economic trendsEarth system trendsIt is not difcult to imagine actions for business, government and fnance leaders to address this, but one frst 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.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.In their present form, the SDGs are broadly defned, 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 separatelyto 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).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 fnance 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 afunction of doing business.What should theeconomy be delivering?Today, business is regarded by governmentsprimarily as an engine of economic growth.While private enterprise can excel at deliveringthat growth, there is a problem.Much economic activity does not contribute to the SDGs, and may in fact undermine their delivery.Rewiring the Economy 4Sustainable Development GoalsFor the last ffteen 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 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.4http://sustainabledevelopment.un.orgRewiring the Economy 5Food, water, shelter, sanitation, security and basic freedoms for allLimit GHG levels to stabilise global temperature rise under 2CHealth, education, justice and equality of opportunity for allSecure, socially inclusive jobs and working conditions for allPreserve stocks of natural resources through efcient and circular useMaintain ecologically sound landscapes and seas for natureand peopleCLIMATE STABILITYHEALTHY ECOSYSTEMSRESOURCE STEWARDSHIP DECENT WORKHEALTH AND WELLBEINGBASIC NEEDSFigure 3:What the economy should be delivering: six broad social and environmental ambitionsThe question is how do we put these ambitionsinto practice? Business thrives on a clear long-term plan. To this end we have developed a ten-yearplan to empower our network to lay the foundations for a sustainable economy one that is capableof achieving these ambitions.5The planThe plan focuses on creating the enabling conditions for sustainable business: the conditions that, if present, would encourage capital to fow into sustainable business models6 on the basis of their superior risk and return. The vision of the plan is to lift and tilt the playing feld 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 fnance leaders to work together on a common, jointly benefcial 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, fnance 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. 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, fnance 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 diferent 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, fnancial 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.This is an opportunity for business, fnance and government leaders to work together on a common, jointly benefcial agenda.Rewiring the Economy is a catalyst for change, requiring extensive and diverse collaboration over the next decade to deliver its aims.Rewiring the Economy 65A sustainable economy does not guarantee a sustainable society factors like basic freedomsand universal healthcare and education lie beyond the control of business.6Business models that produce positive social and environmental outcomes alongside fnancial returns.SOCIAL OUTCOMESENVIRONMENTAL OUTCOMESBUSINESSFINANCEGOVERNMENTDECENTBASICECOSYSTEMSHEALTH ANDSTEWARDSHIPSTABILITYRESOURCECLIMATEWORKNEEDSHEALTHYWELLBEING12345678910TEN INTERCONNECTED TASKSSIX OUTCOMES OF A SUSTAINABLE ECONOMYsecurity and basicshelter, sanitation,Food, water, freedoms for allof opportunityjustice and equalityHealth, education,for alland working inclusive jobsSecure, sociallyconditions for allthrough efcientof natural resourcesPreserve stocksand circular useand seas for naturesound landscapes Maintain ecologically and peopletemperature riseto stabilise globalLimit GHG levelsunder 2C targets andSet the rightmeasuresexternalitiesCorrectwith scal policyuseful innovationDrive sociallyacts for theEnsure capitallong termcosts of businessValue the true activitiesnancialInnovatestructuresambition andSet a boldinnovatemeasurementBroadenand disclosureand incentivesGrow capabilitycommunications forHarnesspositive changeRewiring the Economy 7Figure 4:Ten tasks for business, fnance and government to lay the foundationsfor a sustainable economyRewiring the Economy 8Task 1:Measure the right things,set the right targetsGovernments 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 sufcient 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 messagesfor business.New metrics that integrate changes in social and natural capital alongside economic output provide a more rounded view of economic progress.The ten tasksTasks for governmentGovernments 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 fnance and business leaders, are needed to achieve this.Rewiring the Economy 9Task 2:Use fscal policy to correct externalitiesTask 3:Drive sociallyusefulinnovationGovernments can use every opportunity to create drivers and incentives for innovation aligned with core sustainability goals, and can exemplify and enable sustainable business.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 efective at driving innovation? Are they aligning eforts to drive and support innovation with their sustainability goals?Governments can internalise environmental and social costs in economic activities through fscal policy, benefting sustainable business models. Novel fscal policies are required to ensure that the true costs of environmental and social externalities are borne by the economy rather than being ofoaded 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 diferentially 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 fnancing of low carbon, climate resilient infrastructure.Another powerful way to refect 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 fscal policy to correct market failures that prevent business from delivering socially useful goods and services? Are governments setting a carbon price that refects 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 runcounter to sustainable development goals. Are governments aligning eforts to drive and support innovation with their sustainability goals?Rewiring the Economy 10Task 4:Ensure capital acts for the long termTasks for fnanceIf governments steer the economy then fnance provides its fuel. As a universal infuence on business, the role of fnance 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.What would it take to incentivise the fnancial value chain to seek long-term performance?Investors of capital can demand more from their money, using their infuence to drive long-term, socially useful value creation in the economy in the interests of their benefciaries.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 diferent intermediaries in the fnancial value chain, shareholder votes on policies that do or do not align with long-term value creation (such as remuneration and environmental performance), andthe tools used to translate future business opportunities into present-day value.Extending the timeframe over which fnancial 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 benefciaries the public.This big and urgent reform faces an uphill climb against a well-known culture of short-termism in the fnance sector, and warrants action from governments, regulators, capital owners, fnancial intermediaries, consultants, risk experts and business.What would it take to incentivise the fnancial value chain to seek long-term performance?The ten tasksRewiring the Economy 11Task 5:Price capital according to the true costs of business activitiesTask 6: Innovate fnancial structures to better serve sustainable businessCapital providers, and those who regulate them, can jointly consider how to refect social and environmental risk factors in the cost of capital.The cost of capital is a key factor in business decision-making. It is infuenced 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 fourish. Today, the cost of capital rarely refects the true costs of business activities across equity, debt and insurance. This means that one of the key drivers of business decision-making 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 fnancial regulators, who, for example, are asking whether the by-products of unsustainable economic activity, such as climate change and income inequality, could threaten fnancial stability.Some individual capital providers are identifying strategies that enable them, on a unilateral basis, to refect more closely the true costs of business activities in 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 eforts need to be brought front and centre of fnancial institutions thinking, enabled as necessary by fscal, 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 refects the true costs of business activities across equity, debt and insurance. Businesses that address societys changing needs are almost certainly the brightest businesses of the future.Financial intermediaries in particular can apply their infuence and creativity to ramping up the fow of capital into business models that serve societys interests.In recent decades fnancial intermediaries, such as banks, have demonstrated incredible creativity in extracting fnancial 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 fnancial intermediaries to be too high or the scale of their operation too small take of-grid renewable energy in Africa. They fnd 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 fnancial value chain, governments and businesses to understand how innovative fnancial services, including public-private fnancing 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 fnancial 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 fnancial intermediaries to better supporttheir clients?Rewiring the Economy 12Task 7:Set a bold ambition, and innovate to deliver greater valueTasks for businessIf fnance 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, fnancial and educational institutions.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.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 multi-year. 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 diferently 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 fnancial sector to provide capital, and from governments to set the right enabling conditions.Companies will need to consider how value can becreated while making a fair social contribution with neutralor 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 proft? Do all staf and workers through the supply base receive at least a living wage?The tentasksRewiring the Economy 13Task 8:Broaden the measurement and disclosure frameworkTask 9:Grow the capability and incentives to actCompanies can build a fuller understanding of their impacts (and dependencies) on society, including the implications for capital allocation.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: fnancial accounting, management accounting and capital allocation. By working with the accounting community to broaden the use of environmental, social and governance (ESG) reporting, companies can send a clear message tocapital markets about their longer term approach tovalue 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 profle of an investment, companies can enhance their capital allocation processes.The transparency resulting from integrated reportingand disclosure by listed companies (as well as large private companies and public institutions) will facilitatea more informed dialogue with stakeholders about the role of business in meeting societal challenges.What is the net contribution of a company, and how is it handling trade-ofs?Companies can send a clear message to capital markets about their longer term approach to value creation.Companies will beneft from developing the people and skills to operate in new ways that are consistent with sustainable business success.Companies can align their capital, talent and senior attention with a sustainable business vision, and ensure people are empowered to deliver.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.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 beneft 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 fnancial sector can review their reward and recognition schemes to ensure that managers are not facing perverse incentives to preserve the status quo, and are efectively rewarded for long-term, sustainable performance.A simple test: is sustainability good for your career?Rewiring the Economy 14Task 10:Harness communications for positive changeCompanies can use their communications and marketing muscle to build public understandingof (and appetite for) sustainable business.A signifcant proportion of the information citizens and governments receive is via the communications, marketing and public relations undertaken by business. These powerful infuences 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 afairs 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 frms 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 fnd solutions. Deploying corporate infuence 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 efective enabling policies to governments?Marketing and communications professionals, and public afairs experts, have a vital role in building awareness and engaging in an informed debate about sustainability.The ten tasksTasks for businessRewiring the Economy 15Laying the foundations for a sustainable economy will require widespread and long-term commitment to collaborative actionThe University of Cambridge Institute for Sustainability Leadership (CISL) is committed to working with leaders from business, government and fnance, 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 eforts add up to put us on a path to a sustainable economy.A unique partnerCISL is a unique partner in this process. We bring academic rigour to bear on business and policy problems and translate fndings into actionable steps. We have the ability to convene across boundaries and create space to initiate difcult conversations and help stakeholders co-create solutions.We see our role in Rewiring the Economy as follows:Convening leaders and groups of companieswith a common commitment to change and adesire to achieve things collaboratively that theycant achieve on their ownBuilding leadership capacity through executiveand graduate educationUndertaking applied and fundamental researchto build the knowledge baseWorking with individual companies at a strategiclevel to support transitionEnabling our active network of organisationsand individuals to champion changeWe will measure our impact by our ability to catalyse the ten tasks outlined in this plan. In short, how efectively we contribute to rewiring the economy.We believe our strengths lie in four strategic areas:Building leadership capacity for systemic changeBuilding on 25 years experience working with leaders,CISL is developing new approaches to leadership across business, fnance and policy. To rewire the economy wemust recognise the capabilities, knowledge and mindsetsthat 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 qualifcations and online learning tools build capacity and specifc skills in individuals and organisations.Business model innovationMuch 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 proftability 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.Making progress on sustainability over the next decade will require the creativity and determination of business, fnance 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.Rewiring the Economy 16Laying the foundations for a sustainable economy will require widespread andlong-term commitment to collaborative action continuedA just transition to a low carbon economyWe 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 difcult to deal with sectors such as extractives and energy intensives to support their pathways to transition.A sustainable fnancial systemWe work with fnancial institutions, regulators and corporate fnance 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 fnance sector to take action in their own industries and work with leaders in other parts of the economy. We currently work with several fnancial services organisations to build their leadership capacity through customised programmes of work.Over to youWe 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 joiningyou on that journey.Printed by Seacourt.net, naturally responsible printing.Zero waste to landfll100% waterless LED100% alcohol and substitute free100% carbon neutral100% renewable energy100% recycled FSC stock100% VOC free inksHead Ofce 1 Trumpington StreetCambridge, CB2 1QAUnited KingdomT:+44 (0)1223 768850E: info@cisl.cam.ac.ukEU Ofce The Pericls BuildingRue de la Science 23B-1040 Brussels, BelgiumT:+32 (0)2 894 93 20E: info.eu@cisl.cam.ac.ukSouth Africa PO Box 313Cape Town 8000South AfricaT:+27 (0)21 469 4765E: info.sa@cisl.cam.ac.ukCambridge insight, policy infuence, business impactThe University of Cambridge Institute for Sustainability Leadership (CISL) brings together business, government and academia to fnd 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 staf.HRH The Prince of Wales is the patron of CISL and has inspired and supported many of our initiatives.www.cisl.cam.ac.uk