A Beginner's Guide to Doughnut Economics: An Inclusive Approach to Sustainable Business
The sweet spot where all of humanity can thrive.
Photo by Anastasiia Chepinska on Unsplash
Kate Raworth’s animated energy is a joy to watch. Her TED Talk captivates as she narrates the inspiration behind Doughnut Economics.
The problem, Raworth contends, is our addiction to growth. The need for perpetual growth—that ever-rising line—has been so deeply ingrained in our psyches, it’s become the de facto success indicator for over 60 years.
I’m reminded of a passage from The Little Prince:
“Grown-ups love figures. When you talk to them about a new friend, they never ask questions about essential matters. They never say to you: ‘What does his voice sound like? What games does he prefer? Does he collect butterflies?’ They ask you: ‘How old is he? How many brothers does he have? How much does he weigh? How much money does his father earn?’ It is only then that they feel they know him.
If you were to mention to grown-ups: ‘I’ve seen a beautiful house built with pink bricks, with geraniums on the windowsills and doves on the roof….’ they would not be able to imagine such a house. You would have to say to them: ‘I saw a house worth a hundred thousand pounds.’ Then they would exclaim: ‘Oh! How lovely.’”
An observation that’s just as relevant today as it was when the book was written in the 1940s. Why are we so obsessed with numbers and money?
From Growth-Addicted to Growth-Agnostic
Capitalism has a lot to answer for, including the fact that by 2030, global poverty is estimated to reach 7 per cent (around 600 million people).
Meanwhile, a recent BBC report highlights a 66% chance we’ll exceed the 1.5C global warming threshold between now and 2027.
We’re a long way from achieving the United Nations’ 2030 Sustainable Development Goals (SDGs), which strive to end poverty, improve human lives, and protect the environment, by 2030.
There’s a time and place for growth.
Babies, adolescents, young animals and plants.
New businesses and ideas.
Low- and middle-income countries where most of their population still live in poverty.
All the above need growth, but just as humans, animals, and plants stop growing when they reach maturity, the same goes for economic growth.
We’ve made tremendous progress with circular and sustainable business models, but as long as businesses remain primarily growth-driven, they’re still contributing to overconsumption.
Carbon emissions are generated not just in the production process, but throughout the entire supply chain: from the transportation of raw materials to the manufacturing process to the distribution, until the product finally arrives in the hands of the consumer. And there’s the product’s end of life to consider too.
Some companies, like Allbirds, are leading the charge in sustainability innovation with their upcoming launch of the world’s first net zero carbon shoe—without carbon offsets! But they’re the exception to the rule.
Maybe instead of pushing consumers to buy new products all the time, sustainable businesses need to also factor in circular and community elements such as repair and reuse or sharing services.
Yes, I realise this seems contradictory to how a business works. Surely a business should drive sales and not the opposite?
Well, that’s one perspective.
The other would be that a business could exist to serve the larger community, for example, by:
a) Partnering with repair service providers such as local cobblers, tailors, tech experts, or
b) Facilitating sharing platforms to improve access for those in lower-income groups.
Businesses could still sell products, but not with the sole purpose of fuelling consumption and generating profits for shareholders. Rather, by applying Doughnut Economics, businesses would be designed to be regenerative and distributive.
Doughnut Economics: Sustainability Made Inclusive
Doughnut Economics is derived from a simple but fundamental idea: in order for humanity to thrive in the 21st century, we need a regenerative and distributive economy that’s growth agnostic.
The goal: to get all of humanity into the Doughnut’s sweet spot.
Image: Lon Tweeten for TIME
The Doughnut consists of two concentric rings:
An inner ring: the social foundation that ensures no one is deprived of life’s essentials, and
An outer ring: the ecological ceiling we must not collectively overshoot, to protect Earth’s life-supporting systems.
Between these two rings, the doughnut-shaped space provides the sweet spot, where humanity can thrive in an ecologically safe and socially just space.
As Raworth so eloquently puts it, instead of economies that need to grow, whether or not they make us thrive, we need economies that make us thrive, whether or not they grow.
From Raworth’s perspective, economic growth should be a means to achieve social goals within Earth’s boundaries, rather than making it an indicator of success in itself.
I couldn’t agree more.
Money is a necessity for us to live a decent life, but how much wealth is enough? It’s a form of addiction in itself. People who hoard wealth and have millions tucked away will always want more.
Meanwhile, hundreds of millions lack access to even the most basic of necessities. How is this right?
We can do better, and we must.
It starts with embracing a different mindset.
A Quick Intro to Doughnut Economics’ Seven Ways to Think Like a 21st-Century Economist
Raworth’s book, Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist, aims to change our perspective—from the 20th century’s self-profiting economic thinking to a more open and dynamic mindset befitting our modern, complex times.
Source: DEAL
For a quick preview, watch these colourful 90-second animations illustrating each of the seven ways.
1. Change the goal: from GDP growth to the Doughnut
Instead of “endless growth”, we need a far more ambitious and global economic goal for the 21st century: “to meet the needs of all within the means of the living planet”—in short, to thrive together, in balance.
2. See the big picture: from self-contained market to embedded economy
From a free market economy—where regulation is minimal, the state’s role restricted, society deemed irrelevant, and Earth’s resources believed to be unlimited—Doughnut Economics proposes a more holistic worldview.
One where the economy is embedded within our natural environment and within our human society. In this embedded economy, the market, household, state, and commons all play an equally important role in supporting human welfare.
Embedded Economy. Diagram by Marcia Mihotich. Copyright © 2017 Kate Raworth.
3. Nurture human nature: from rational economic man to social adaptable humans
Image by Marcia Mihotich
The ‘rational economic man’ is the central figure in mainstream economic theory. Depicted as “standing alone, money in hand, calculator in head, ego in heart, and nature at his feet, he hates work, loves luxury, has insatiable wants, and knows the price of everything.”
With the global population predicted to reach 10 billion by 2050, if we wish to thrive together on this fragile planet, it’s time for a new portrait of humanity.
One that’s reciprocating, interdependent, and compassionate, driving a new brand of economics that nurtures the best of human nature, instead of the self-serving ‘me, me, me’ mentality.
4. Get savvy with systems: from mechanical equilibrium to dynamic complexity
Our economy is an ever-evolving system, not one that can be controlled using linear mechanical models (like the theory of market equilibrium). Instead, we need to apply systems thinking in steering the economy.
Systems thinking, as defined by Wikipedia, “is a way of making sense of the complexity of the world by looking at it in terms of wholes and relationships rather than by splitting it down into its parts.”
5. Design to distribute: from ‘growth will even it up again’ to distributive by design
Inequality is not an economic law or necessity; it’s simply a result of bad design.
21st-century economists advocate designing economies to be far more distributive of value among those who’re involved in generating it. This means not just redistributing income, but pre-distributing the wealth potential of the enterprise (scroll to the end for examples of distributive businesses).
6. Create to regenerate: from ‘growth will clean it up again’ to regenerative by design
As with inequality, we’ve seen that growth does not reverse the devastating effects of pollution. If anything, it merely compounds the problem.
The solution is simple: businesses designed to regenerate rather than degenerate. We need a circular economy that allows Earth to flourish so that we too, can thrive.
7. Be agnostic about growth: from growth-addicted to growth-agnostic
It’s time to flip our perspective on growth. Instead of economies that are financially, politically, and socially addicted to growth, it’s time for us to explore how we can learn to live with or without it. We need economies that make us thrive, whether or not they grow.
Is the Notion of a Doughnut Economy So Farfetched?
Sceptics have accused Raworth of “we-ism” and criticised her “unfeasibly optimistic” claims.
Is it really so implausible to imagine a world where businesses, cities, and countries can all work together to create a regenerative and distributive global economy, where the focus isn’t on growing and hoarding wealth but on sharing it and taking care of Earth at the same time?
Let us not forget that not so long ago, airplanes, self-driving cars, female Prime Ministers, same-sex marriage, and gender fluidity, were all inconceivable.
But a wise man by the name of Nelson Mandela said, “It always seems impossible until it's done.”
So in an era of inclusivity, diversity, open platforms and social movements, maybe a revolutionary economic system that genuinely seeks to take care of humanity and protect our environment might not be so outlandish after all.
It won’t be easy; change never is, especially one of this scale. It will be tough for the world to buy into a growth-agnostic culture, but again, nothing’s impossible.
We just need to pitch in and do our part. As it is, businesses and cities are already stepping up to the challenge (examples below).
How to Get Your Sustainable Business into the Doughnut’s Sweet Spot
To make your sustainable business regenerative and distributive, first, you have to start with its ‘deep design’, defined by Doughnut Economics as:
The purpose of the business
How it operates in networks
How it is governed
How it is owned, and
The nature of its relationship with finance
Source: DEAL
The Doughnut pivots organisations to focus on benefit generation instead of value extraction.
Inspired by Marjorie Kelly (a leading theorist in next-generation enterprise design), these five layers of deep design are the building blocks of an organisation’s capabilities and contributions to the world.
Doughnut Economics calls on businesses to transform their deep design “to become not just ‘more sustainable’ but regenerative by design, and not just ‘more inclusive’ but distributive by design.”
“Today’s degenerative industrial systems – inherited from the last century – are still using up and running down the living world, and must rapidly be turned into regenerative industries that work with Earth’s cycles and within Earth’s means. At the same time, today’s divisive context – thanks to the concentration of ownership and power in far too few hands – must be turned into distributive outcomes, through an economy that shares value and opportunity far more equitably with all who co-create it.”—Doughnut & Enterprise Design paper
Join Businesses & Cities in the Transformation
Examples of regenerative enterprises:
Yvon Chouinard, Patagonia founder, former owner, and current board member proclaims:
“Instead of extracting value from nature and transforming it into wealth, we are using the wealth Patagonia creates to protect the source. We’re making Earth our only shareholder. I am dead serious about saving this planet.”
This radical move brings Patagonia’s governance, ownership, and financial parameters in line with its stated purpose to “save our home planet”.
UK-based soap and haircare brand Faith In Nature formally and legally restructured the company by appointing a non-executive director to represent nature on its board, “giving the natural world a legal say in its business strategy”.
When Willicroft’s initial life cycle analysis revealed that cashews were the highest greenhouse gas emitting ingredient in their plant-based cheese, they decided to switch to beans and pulses instead, which create ten times lower emissions (read more here).
They’re also spearheading the ‘Make Mother Nature Your CEO Campaign’ by inviting companies to join their initiative.
Examples of distributive enterprises:
Every piece of Manos del Uruguay’s ethically and sustainably handmade garments helps improve the quality of life of Uruguay's rural women. The artisans who create the garments are owners of the company, and profits are either shared among the cooperatives or re-invested in the organisation.
As one of the 10% most social companies in the Netherlands, Breedweer associates sustainability with creating social returns, showing that the proof is indeed in the doughnut!
Besides implementing circular business models in their cleaning services, they proactively employ people from vulnerable target groups, and train and develop them at the Breedweer Academy. The company also reinvests 50% of profits into activities supporting their social mission, ensuring that they create continuous and lasting social impact.
A dairy cooperative in India, Amul’s small-scale farmers own the business, benefit from its profits, and have a say in the way the business is run.
While these businesses are still works in progress to becoming fully regenerative and distributive, they are prime examples that transforming the deep design of business—specifically its Purpose, Networks, Governance, Ownership, and Finance—is key to unlocking the potential of business to shape a regenerative and distributive future humanity so sorely needs.
The Emergence of Doughnut Economic Cities
So far, Doughnut Economics has been adopted in cities such as Amsterdam, Copenhagen, Brussels, Dunedin (New Zealand), and more.
Amsterdam envisions bringing their 872,000 residents into the Doughnut’s sweet spot, and is collaborating with Raworth’s Doughnut Economics Action Lab (DEAL), introducing massive infrastructure projects, employment schemes, and new policies for government contracts to make it a reality.
It might seem overwhelming—the goal of meeting the needs of all within the means of the living planet. But as with all things, we need to start somewhere.
Will you join the revolution?
How do you feel about transforming the deep design of your sustainable business to be regenerative and distributive? What might that look like?
