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Helpful prior knowledge and learning objectives
Helpful prior knowledge and learning objectives
Helpful prior learning:
Section 1.1.1 The economy and you, which explains what an economy is and how it is relevant to students’ lives
Section 1.1.2 The embedded economy, which explains the relationship between the economy and society and Earth’s systems
Section 1.1.4 Regenerative economies, which explains how circular, distributive and caring, needs-based and sufficient economies can meet human needs within planetary boundaries
Section 3.3.1 The deep design of firms, which explains the major transitions that business needs to make to meet human needs within planetary boundaries
Section 3.3.2 The purpose of firms, which explains the purpose of business and the role of profits
Section S.1 What are systems?, which explains what a system is, the importance of systems boundaries, the difference between open and closed systems and the importance of systems thinking
Section S.2 Systems thinking patterns, which outlines the core components of systems thinking: distinctions (thing/other), systems (part/whole), relationships (action/reaction), and perspectives (point/view)
Learning objectives:
discuss the role and importance of networks for regenerative businesses, including the responsibilities of businesses to internal and external stakeholders
discuss the role and importance of governance for regenerative businesses, including the disputed concept of fiduciary duty
El Puente, a fairtrade business in Germany, connects artisans in the Global South with international markets, ensuring fair wages and long-term partnerships.
When COVID-19 hit, many businesses closed and cancelled orders, leaving workers without jobs or support. El Puente, however, acted differently. Since their suppliers were involved in decision-making, El Puente quickly recognized the crisis the suppliers faced. Despite factory closures and shipping issues, El Puente paid suppliers upfront, even with uncertainty about when orders would be fulfilled.
This financial commitment allowed social enterprises and cooperatives to survive the COVID-19 disruption, ensuring thousands of workers in vulnerable regions continued to receive income. El Puente not only protected livelihoods, but also demonstrated the strength of their business model, where networks and stakeholder representation in governance are key to resilience.
Figure 1. The networks and governance of El Puente show how regenerative business design can increase resilience
(Credit: DEAL, CC BY-SA 4.0)
How can businesses design regenerative relationships with internal stakeholders?
How can businesses design regenerative relationships with internal stakeholders?
Businesses build strong relationships with internal stakeholders, people who own or are directly employed by the business (Figure 2). Regenerative relationships with internal stakeholders create fair, supportive workplaces where businesses value all contributions and support peoples’ personal development and ability to care for others through:
living wages: paying living wages helps workers meet their own and their household’s needs, reducing financial stress;
labour rights: providing safe conditions and fair working hours, even where labour laws in a country are weak;
supportive culture: providing flexible schedules, care leave, and development opportunities help workers balance personal and professional lives while building skills;
balancing interests: profit-sharing, employee ownership, inclusive decision-making, and collective bargaining, where employees negotiate together, all help to balance power in the business. These strategies can also align the goals of employees and owners, encouraging collaboration and reciprocity, building resilience.
Figure 2. Internal stakeholders of a business
These regenerative practices not only support human well-being but also help retain skilled workers and ensure the long-term sustainability of the business.
How can businesses design regenerative relationships with external stakeholders?
How can businesses design regenerative relationships with external stakeholders?
External stakeholders are people who have an interest in the business, but are not directly working within it. Regenerative relationships with these groups also aim to build reciprocal partnerships that support social and ecological resilience.
nature: businesses are embedded in Earth systems and have a responsibility to regenerate them. Many are ‘putting nature on the board’ where nature’s interests are included in decision-making. This could involve circular business models, or stopping production of ecologically damaging products;
customers: businesses should provide goods and services that meet real needs and avoid manipulating customers into unnecessary purchases. Fair pricing is key, ensuring market power is used for positive impact rather than exploitation;
suppliers: businesses use fair trade practices (Section 3.4.4), ensuring good labour conditions and promoting sustainability in the supply chain. Long-term partnerships and fair payments enable suppliers to support their communities and contribute to economic stability;
Figure 3. The networks of a business include both internal and external stakeholders
state: businesses must pay their fair share of taxes to fund public services and infrastructure, which builds social and economic resilience. They can also partner with governments on essential projects or support laws that encourage social and ecological well-being.
community: businesses can invest in local initiatives like education, healthcare, or environmental conservation. Offering apprenticeships for local youth and sharing facilities can strengthen community ties and promote social cohesion.
industry peers: businesses can collaborate with competitors to establish regenerative industry standards, avoiding a ‘race to the bottom’ of cost-cutting that harms communities and ecosystems;
progressive alliances: businesses can join networks focused on issues like fair tax, climate action, and circular economies can help businesses share strategies and amplify their positive impact;
investors: businesses needing money to grow their impact should look for investors who share their values and provide patient capital. This reduces financial pressure for short-term profit, allowing companies to engage positively with their stakeholders. This will be explored further in Section 3.3.5).
Figure 4. Businesses can engage with their networks to regenerate social and ecological systems
Move green slider to see second image.
(Credit: Doughnut Design for Business - Core Tool, CC BY-SA 4.0)
How can good governance shape regenerative business practices?
How can good governance shape regenerative business practices?
Governance refers to the systems and processes a business uses to manage its operations. Governance involves making decisions, setting policies, and ensuring at a minimum that laws are followed. Where laws are weak, good governance will go above and beyond to ensure that the business is a positive force for good in the local community and wider world. Good governance involves:
Transparency and
accountability
Openly sharing their practices and impacts such as carbon footprint or waste management, businesses can be held accountable by their stakeholders.
Openly sharing their practices and impacts such as carbon footprint or waste management, businesses can be held accountable by their stakeholders.
Inclusive
decision-making
Involving diverse stakeholders leads to more balanced decisions that consider multiple perspectives.
Setting goals, monitoring, evaluation
Goals are important to give the business a direction. Reviews of business practices identify areas for improvement and recognize successes.
Risk-management
Identifying and addressing social, economic, and ecological risks, supports resilient businesses and helps take focus away from short-term profits that may harm long-term stability.
Sufficiency
Knowing when the business has reached a size that enables it to optimise impact prevents endless, aimless growth that threatens social and ecological stability.
Fiduciary duty is a key topic in governance. A fiduciary is someone who holds a legal or ethical responsibility to act in the best interests of another person or group. In business, this duty usually applies to directors and managers of a business, who are expected to act in the best interests of the business and its shareholders/owners.
For decades, many businesses and some laws have narrowly interpreted fiduciary duty as maximising profits for shareholders. However, since businesses also have trust-based relationships and responsibilities to other stakeholders, this view is increasingly questioned. Even for shareholders, prioritising short-term profits can harm the long-term health of the business. When a company exploits social or ecological systems, it risks undermining its own future.
Figure 5. Including diverse voices from internal and external stakeholders is important for good governance
(Credit: DEAL, CC BY-SA 4.0)
States play an important role in ensuring good governance, especially when business stakeholder interests conflict. Laws and regulations can require business structures and practices that encourage regenerative actions. For instance, some countries require multi-stakeholder participation in company decision-making. For example, in Germany, works councils (Betriebsrat) improve employee-management relations by allowing workers to participate in decisions. These councils have two key roles: co-determination, where workers elect board members, and participation, where workers are consulted on specific issues.
The varied elements of good governance help businesses balance profit with positive impact to create more resilient social and ecological systems.
Figure 6. Good governance is a key element of regenerative business practices
(Credit: DEAL, CC BY-SA 4.0)
Activity 3.3.3
Activity 3.3.3
Concept: Regeneration
Skills: Thinking skills (transfer) and communication skills
Time: 30-40 minutes
Type: Individual, pairs, or small group?
Option 1: Mind-mapping business networks and regenerative strategies
Using the information in this section, create a mind map of internal and external stakeholders. Add regenerative strategies to engage with those stakeholders to the map.
Option 2: Case study of Tony’s Chocolonely
Tony’s Chocolonely is a chocolate producer working to strengthen social and ecological systems through its relationships with external stakeholders.
Which stakeholders is Tony’s focused on, and what is its goal, based on the information on its website?
Tony's Chocolonely has been criticised for being removed from a list of slave-free chocolate companies. Read Tony's response to the criticism. The response reveals more about its approach to stakeholders.
How does the situation and the company’s response relate to networks and governance?
Ideas for longer activities and projects are listed in Subtopic 3.5 Taking action
Checking for understanding
Checking for understanding
Further exploration
Further exploration
El Puente website - the website includes information about how the business got started, who the business’s global partners are and how they work to ensure strong networks and governance
Doughnut design for business case studies - a set of case studies of real businesses using regenerative business design. These can be used in the classroom to help students apply their understanding of the five design elements in real cases. Difficulty level: easy/medium
Mother Nature in the Boardroom Campaign - Sea Change Project’s short film, narrated by Craig Foster and featuring Dr Jane Goodall. It has an urgent message for decision makers: provide a seat at your boardroom table for Mother Nature. Difficulty level: easy
We’re the world’s first company to put Nature on the board. Here’s why… - A short video from Faith in Nature about the difference it makes when Nature is put on the board to help guide decisions about a business. Difficulty level: easy
The Shareholder Value Myth - Legal expert Lynn Stout discusses how the focus on maximising profits for shareholders can be harmful for businesses and even for shareholders themselves and how it is more valuable to spread the focus over several objectives. The focus of the talk is on the United States, but the broader points reflect general trends in the way businesses have been managing stakeholder interests. Difficulty level: medium
Is there really a fiduciary duty to destroy the climate? - An article by Wharton Business School Professor Eric Orts discussing the impact of profit-maximising fiduciary duty models on the ability of businesses to make environmentally-responsible decisions. He notes positive changes in some jurisdictions, but also highlights the role of political capture by powerful businesses in preventing needed change to corporate governance. Difficulty level: medium.
Inclusive Business: Reimagine Key Operations - a short course from the Acumen Academy about how businesses can become more inclusive
Sources
Sources
Doughnut Economics Action Lab (March 2024). Doughnut Design for Business DEAL’s guide to redesigning businesses through Doughnut Economics – Core workshop Version 1.2. https://docs.google.com/presentation/d/1x8flVhi7JKRRzQClrJnlGkdjd7TpIGXeQiVMQotIH0Q/edit?usp=sharing.
Kelly, M. (2012). Owning our future: The emerging ownership revolution. Berrett-Koehler Publishers: Oakland.
Kelly, M. (2013). The architecture of enterprise: Redesigning ownership for a great transition. The Good Society, 22(1).
Raworth, K. (2017). Doughnut economics: seven ways to think like a 21st century economist. London: Penguin Random House.
Sahan, E. (2023, January). Doughnut Design for Business: Introduction to Redesigning Businesses through Doughnut Economics [Video]. YouTube. https://youtu.be/ViHwewmuArI.
Sahan, E. et. al. (2022, November). What Doughnut Economics means for business: creating enterprises that are regenerative and distributive by design. Doughnut Economics Action Lab. https://doughnuteconomics.org/rails/active_storage/blobs/redirect/eyJfcmFpbHMiOnsibWVzc2FnZSI6IkJBaHBBcXNpIiwiZXhwIjpudWxsLCJwdXIiOiJibG9iX2lkIn19--259000ee416367cd44b4e63d37637ded7c89f384/Doughnut%20&%20Enterprise%20Design%20-%20CET_DEAL%20paper%20V.1.0.pdf
Terminology
Terminology
Link to Quizlet interactive flashcards and terminology games for Section 3.3.3 The networks and governance of firms - in order of appearance
fairtrade: an arrangement designed to help producers in developing countries achieve sustainable and equitable trade relationships
Global South: a group of countries with low-middle incomes and less industrialisation; most of the global population lives in these countries, but these countries bear little responsibility for exceeding planetary boundaries
market: a system where people buy and sell goods and services for a price.
wage: payment for work
social enterprise: a business that operates for a social or environmental purpose
cooperative: an organisation owned and controlled by people to meet their common economic, social, and/or cultural needs
income: money received from work or investments
stakeholder: a person who has an interest in or is impacted by some activity
governance: the process of overseeing the control and direction of something
resilient: able to recover after a disturbance
internal stakeholder: people who own or are directly employed by the business
regenerate: the process of restoring and revitalising something
living wage: a wage that is high enough for a person to cover their living expenses
household: a system where people living together care for each other and do domestic work, often termed the 'core economy'
labour law: a law relating to the rights and responsibilities of workers
culture: the beliefs, values, attitudes, behaviours and traditions shared by a group of people and transmitted from one generation to the next
care leave: time off of paid work used to care for others; can be paid or unpaid by the employer or state
profit-sharing: a system in which the people who work for a company receive a direct share of the profits
employee ownership: where all employees have a significant and meaningful share of ownership in a business
collective bargaining: negotiation of wages and other conditions of employment by an organised body of employees
power: the ability to influence events or the behaviour of other people
reciprocity: exchanging things and favours with others for mutual benefit
sustainability: meeting people’s needs within the means of the planet
external stakeholders: people who have an interest in the business, but are not directly working within it
system: a set of interdependent parts that organise to create a functional whole
market power: the ability of a firm to influence the price of their product in a market, as well as other market conditions
supply chain: the sequence of processes involved in the production and distribution of a product
tax: payment from individuals or organisations to the government, used to provide public infrastructure and services
infrastructure: large scale physical systems that a society needs to function (roads, railways, electricity networks, etc)
social cohesion: the extent to which people in society feel connected to one another and share common values
patient capital: long-term investment, where investors are prepared to wait a considerable amount of time before seeing any financial returns
carbon footprint: a measure of the amount of carbon dioxide released into the atmosphere as a result of the activities of a particular individual, organisation, or community
fiduciary duty: the duty to act in a way that will benefit someone else financially
fiduciary: a person who has a duty to act in a way that will benefit someone else financially
ethical: relating to beliefs about what is morally right and wrong
shareholder: a person or organisation that ownes a share, or portion, of a business
state: a system that provides essential public services, and also governs and regulates other economic institutions
regulation: a rule that guides individual or group behaviour and enforced by an authority
works council: a group of employees representing a workforce in discussions with their employers
co-determination: cooperation between management and workers in decision-making, especially by the representation of workers on management boards
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