On Leverage Points, Taxes And Cleaner Fish

Archimedes famously had his eureka moment. I'm having one, too. Tax is involved.

Archimedes and cleaner fish

Archimedes may be remembered for many things, but key among them is his thinking on leverage points: "Give me a place to stand,” he said, “and I shall move the Earth." An ambition which resonates powerfully at a time when our planet is spinning off on some unwelcome trajectories.

In essence, Archimedes argued that with the right fulcrum—and a sufficiently long lever—even the heaviest objects could be moved with relatively little effort. In recent months, I have been pondering where we should now be looking for the most powerful leverage points in relation to our looming economic and political transformations.

And then, more memorably, there was the moment in the bath. For most of us, genuine eureka moments are rare—but, when they do happen, history suggests that they can have at least some naked gentlemen leaping out of their baths and running around the streets.

Happily, my latest aha moment was less dramatic and, I hope, less likely to give public offense. Indeed, given that the central idea had been part of my thinking for nearly 50 years, it should have come as less a surprise—but a surprise it nonetheless proved to be.

Rather than happening in a flash, however, or a splash perhaps, the process has taken months—indeed much of the post COVID-19 lockdown era. In headlines, it involved my jumping to a different level of perception. Having focused the first half century of my working life on the business world and on things like brands, business models, technologies and supply chains, I had been increasingly anxious about the market dynamics that dominate individual businesses—powerfully shaping the priorities and decisions of their top teams.

Corporate back-pedalling

Yes, past ventures of mine tried to modify market dynamics, as in the series of Green Consumer books we did back in the late Eighties and early Nineties. Their market impact was remarkable at the time. And I have now worked with successive investment houses and venture capital firms for over thirty years—as the language shifted from socially responsible investment via ESG to impact investment. But sometimes we must be reminded of what we already know—in this case, the fact that in the early phases of revolutions markets push back against our long-term agendas.

One recent example of market pressures denting a company’s publicly declared ambitions was Unilever CEO Hein Schumacher’s back-pedalling on his company’s sustainability targets. A critical view can be found here, while Unilever’s view can be found here. Another Anglo-Dutch giant, Shell, has also recently back-pedalled on its climate targets. Mercedes, too, has reined back its planned switch to 100% electric vehicles. The transformation will continue, said CEO Otto Källenius, but “it will take longer than expected.”

As someone who has worked with Unilever, off and on, since 1986, this latest news was hardly surprising, but it is disappointing—particularly with Volans currently involved with the consumer goods company on revamping its strategy in terms of shaping the climate policy stances adopted by the industry federations it belongs to.

Still, and I suspect for many of us, this mid-course correction (to channel the late, great Ray Anderson) provided yet another reminder that we may be doomed to relative failure if we simply focus our system change efforts on individual companies, even if they are determined to be leaders. Our core challenge relates to the nature of human beings, whether responding to political or market pressures. As they used to say, the spirit may be willing, but—in the face of contrary trends—the flesh can often be surprisingly weak.

Cleaner fish, dirty waters

As a result, and for several years, I have used a “fish-and-water” metaphor to toggle between businesses and markets. I queried whether we were in danger of cleaning up individual “fish” (our business clients and partners) but then releasing them back into dirty, polluted waters (their markets and prevailing politics)—where their original single bottom line obsession often resurfaces, undiluted.

The obvious solution would be to design—or redesign—markets in such a way that we are less reliant on the morality (or passing passions) of individual CEOs and other business leaders. Our challenge, it seems, is to redirect market pressures so that they routinely and inexorably drive healthy decisions and outcomes at every level in our economies. I have begun to explore what we have learned to date in such areas through interviewing people like Richard Sandor.

Then conversations while I was in Germany a few weeks back helped underscore the critical role taxes in shaping the evolution of our economies. The results can take us in counter-productive direction: as a child, for example, I remember being told that bricked-up windows in historic houses were a response to a window tax, first introduced in England in 1696. I didn’t learn until later that the malign effects of the loss of windows, light and fresh air included higher incidences of cholera, smallpox and typhus.  

I also recall the truckers’ protests over twenty years ago when SustainAbility had its offices overlooking Hyde Park Corner—with the gyratory system jammed continuously by trucks whose drivers’ hands seemed to have been superglued to their horns. The cause of their distress—and ours—was the British government’s planned fuel duty escalator, which made a good deal of sense to me at the time. In. the end, though, the government backed down—as did France in the face of the protests of the gilets jaunes.

Taxing questions

But what about the upsides of well designed (and deployed) taxes? Ask ChatGPT to advise on the uses of tax policy in the sustainability field and it mentions such things as: pollution taxes—and specifically carbon taxes; tax incentives for renewable energy; green tax credits; resource extraction; land use and waste management taxes; VAT adjustments for more sustainable products; revenue recycling; and the reform of subsidy regimes that promote unsustainable activities, like the extraction and burning of fossil fuels.

All areas to explore more intensively, clearly, in terms of how design—and redesign—tomorrow’s markets. So, watch this space—and do let me know if you are working in related areas.