Mendoza School of Business

‘Heading off a cliff’

Published: February 4, 2011 / Author: Ed Cohen

From coal-fueled electricity powering homes on the solar-energy-bathed equator to grocery stores in orchard-rich Massachusetts selling apples grown in New Zealand, “We run the most wasteful system of production (that) human beings have ever created,” management guru Peter Senge declared in a talk today at the University of Notre Dame’s Mendoza College of Business.

Senge, author of the seminal management text The Fifth Discipline, about using systems-thinking to convert companies into learning organizations, said people in the United States are blissfully unaware of the costs and waste associated with the global systems for production and delivery of their energy, food and other products.

He mentioned the absurdity of a grocery store near his home in central Massachusetts selling apples grown in New Zealand. An orchard near his house grows the best apples he’s ever tasted, he said. Likewise, energy production should take advantage of local resources, he said. That means relying on solar energy on the equator and on biofuels in the cloudy but verdant Pacific Northwest.

Of our modern-day consumption of materials, he said, it is simply an embarrassment.

 “To support my lifestyle as an American takes about one ton of raw materials extracted from the earth per person per day,” said Senge.  About 90 percent of people’s “material footprint” comes from the “extraction industries,” he said, and 90 to 95 percent of the extraction process is waste.

“The rest ends up in the product, which will end up as waste also.”

The author said the state of the world’s food system is also troubling. Seventy-five percent of the world’s fisheries are overfished with another 15 percent teetering, he said.

Rural poverty persists around the world because prices for agricultural commodities have actually fallen in the past 50 years, he said. A study a decade ago, prior to the advent of the fair-trade coffee movement, found that the price people paid for coffee was actually one-half of the cost of producing it. While coffee houses flourished, growers starved. 

Senge said the World Health Organization estimates that 1 billion people today don’t have reliable access to clean drinking water, and that number may grow to 3 billion by 2020. Another WHO study estimates that China and India will meet only 50 percent of their water demands by 2030, he said.

“We simply will not continue living the way we live, period. We can’t, there’s no substitute for water.”

Senge said the solution is to move from the “take-make-waste” economy of the Industrial Age to what the Chinese call a “circular economy.”

“[W]e have to develop industrial societies that work like nature works.… There is no waste in nature. Everything that is an output or a byproduct of one natural system is a nutrient in another natural system,” he said.

The good news, the management expert said, is that some companies, if not governments, have realized that doing business as usual is unsustainable.

Senge said that in the mid-1990s he met with Antony Burgmans, chair of Unilever N.V., the giant Dutch food conglomerate that includes Lipton tea and Wish-Bone salad dressings. Burgmans told Senge the world food industry was so fundamentally flawed it would not be worth being in the food business two decades hence. Unilever has since formed a partnership with the rural relief organization Oxfam to help farmers earn a living wage. The company also has set a goal of “sustainable sourcing” of all its inputs by 2020.

Under an initiative called “Considered,” Nike aims to have “zero waste and zero toxicity” in its entire line of athletic products by 2020, Senge said. Another apparel company, Icebreaker, makes clothing that is not only biodegradable but purchasers can go online and find the name of the actual sheep farmer who produced the wool in the garment, he said.

“Business is waking up to see that just making money in a world that’s crumbling or an industry that’s heading off a cliff is probably not the wisest strategy,” said the author.

Senge is a senior lecturer at the Massachusetts Institute of Technology and founding chair of SoL, the Society for Organizational Learning, a global community of corporations, researchers and consultants dedicated to the “interdependent development of people and their institutions.”

Senge’s talk was part of the Ten Years Hence speaker series of the Mendoza College of Business, which explores issues, ideas and trends likely to affect business and society over the next decade.

The Ten Years Hence series is sponsored by the O’Brien-Smith Leadership Program, made possible by a generous endowment from William H. O’Brien (ND ’40) and his wife, Dee. The O’Brien-Smith Program endowment provides an opportunity for students and faculty to interact with distinguished leaders from business, government and nonprofit sectors.


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