The Grand Transition – what will come after capitalism?



The IML at EPFL invited a special guest, Guido Palazzo, Professor of business ethics of HEC University of Lausanne, to give an inspiring lecture on “Managing the grand transition”, addressed principally to Operations and Supply Chain Managers of the IML Executive Master class.

In a very stirring 3-hour speech on January 24th, 2020, he described the different eras, which led to today’s ecological crisis: The invention of the alphabet (in 500 BC), followed by the invention of the book print (around 1450 A.D.) and finally the globalization era (1989-2019) with the invention of the Internet, the globalization of markets and its world-wide consequences on the environment.

He explained how Calvinism contributed to the rise of capitalism, and thus turning the expression “greed is good” into something acceptable, after centuries of oppression by the Church on the matter.

The triangle of democratic stability and balance formed by corporations, government and citizen is completely unbalanced today. Before the rise of internet and the opening of the world in 1989, democracies had a more or less reliable division of labor between governments who regulate, corporations that produce goods and pay tax and citizens who produce solidarity and shared identity. Globalization has shaken this balance in all its dimensions.

In a globalized world, of transnationally stretched supply chains, corporations can avoid regulation and put pressure on governments. The power balance is disrupted. Furthermore, there are are globally active corporations but no global regulators or regulation. As a result, corporations often operate in a regulatory vacuum and get involved in human right violations and environmental destruction.

Adidas for example changed its production process entirely since 2005, by designing its products in the USA, producing them in Bangladesh, marketing them from Germany and paying taxes in Switzerland. Where does responsibility lie? According to Prof. Palazzo, nowadays, some managers of multinational corporations produce goods under conditions for which they would go to jail in their own country.

Citing the example of the Dhaka drama in 2013 where a whole building collapsed under the weight of production machines for the fashion industry, there is a collective responsibility. How can we get a system to regulate itself, if everybody in the system has the incentive not to be regulated?

Prof. Palazzo sees a rise of a new era, with a clear turning poing in 2019, with the emergence of climate activists, in particular Greta Thurnberg who has a completely different narrative and a disrupting approach, which points us to the necessity and urgency of organizing a “grand transition” from an unsustainable society into a more sustainable one. We are currently in-between an old regime that has ceased to function and a new one that is not yet clearly visible – we are in a period of uncertainty. Furthermore, the ethics professor avoids the use of the terms sustainability anymore, considering it not suitable to stand for the required transformative change, which we need.

The lecture was followed by a wide discussion between Prof. Palazzo and the audience, on how to disrupt the supply chain within their organization.

In his conclusions, Guido Palazzo suggested that a future belief system should go from a system based on competition (e.g. Michael Porter’s approach “everybody is my enemy”) to one based on cooperation. He sees, in current discourses, the emergence of topics around the powerful metaphor of trees and forests, who collaborate and communicate through their roots and considers this as an inspiration for our societal transformation.

What's next for our Supply Chain?

Regarding the role of Civil Society within a new narrative, IML is seeing a shift in the supply chain world, albeit small for now. Industry has expressed its challenge to meet the, often unpredictable, customer needs. Rather than corporations driving demand, it is more and more necessary to learn how to be agile when the consumer is in the driving seat. Courses have needed to be bolstered with tools to help tackle this challenge.

Supply Chain Managers within the class have proven the case of “the power of the individual” within a company. Their thesis projects have brought significant positive changes within their companies at a middle management level with measurable emissions reductions results. There is no question than collaboration is far more effective in a supply chain than competition. This is long established. An ideal next step would be for companies to open the conversation with their supply chain experts in order to achieve the radical changes necessary.

Author: Alexandra von Schack